A sugar glut in Europe threatens the closure of some cane refineries and drives a deeper wedge between winners and losers in a sharply divided industry.
Refiners who rely on imports of sugar cane, sometimes in deals dating back to colonial or Cold War times, say the European Union is increasing the pain by sticking with a an import tariff that penalises their feed stock. They want that suspended.
Sugar producer Saint Louis Sucre, part of Suedzucker , plans to shut cane refining operations in Marseilles later this year, a spokeswoman said.
Industry sources said some small refineries in Bulgaria have closed, while some other EU refiners, such as Tate & Lyle Sugars, are operating at partial capacity.
Rival plants, factories making the same product but using sugar beet from the fields of Europe, have the cards stacked in their favour, the refiners say.
Beet growers will benefit from the ending of production quotas in October 2017, while refiners say the import tariff makes competition with beet producers unfair. The bulk of EU sugar production comes from beet.
“There may be little room for importing, due to the fact that the EU is turning out to be a competitive producer of sugar in its own right,” said Robin Shaw, sugar analyst with broker Marex Spectron.
“What looks likely to happen is that the EU in most years will be an exporter,” Shaw added.
The EU is currently a net sugar importer. Sugar prices in the bloc have slumped following a surge in imports in recent years, which has led to a surplus, only a small proportion of which can be exported under World Trade Organization rules.
Some of the imports are subject to a “CXL” import duty of €98 a tonne, the bugbear of the refining lobby.
“The sharp decline of sugar prices within the EU market in the last year is having dramatic consequences on European cane refiners, by rendering the imports under the CXL TRQ (tariff-rate quota) economically unviable,” Laura Girol, executive director of the European Sugar Refineries Association, said.
EU white sugar prices averaged €421.0 a tonne in January, the most recent data, down 32.9% from a year earlier.
EU sugar production in the current 2014/15 season is forecast to climb to 19.4 million tonnes, white value, from 16.7 million in the prior season, according to European Commission data.
The CXL duty, introduced after expansion of EU membership, applies to some 30 percent of cane sugar imports to the bloc. The other 70%, imported under preferential agreements from developing countries, is duty free.
Girol said the EU should suspend the CXL duty and provide access to additional cane imports through free trade agreements.
“How can the beet sector compete effectively in the world export market but still see the need for protection against cane imports?” Gerald Mason, senior vice-president at Tate and Lyle Sugars, a unit of privately owned ASR Group, said.
In 2017, the EU Common Organisation of the Market in the sugar sector will bring an end to production quotas by country, and market price support, which allows European sugar producers to sell their unsold stock at a minimum price guaranteed by the EU.
The European Union decided to end the preferential regime almost ten years ago, in 2006.
The deregulation of the European sugar market is expected to hit France's overseas deparments particularly hard.
Many people in French Guiana, Martinique, Guadeloupe, and especially the Réunion, live from the proceeds of the sugar industry, which is currently protected by European regulation.
The current system was called into question in 2006, when the World Trade Organisation (WTO) restricted European sugar exports after a complaint from several producing countries accusing the EU of dumping.
The 2017 deadline is eagerly awaited by large sugar beet producers, who are the most competitive in the sector.
- 30 Sept. 2017: End to EU production quotas by country, and market price support
- Agriculture: EU sugar policy