China is estimated to face a sugar shortage of 2 million tonnes this year, Vietnamese officials and a state-run newspaper said, in line with estimates by Chinese officials, leading to more imports from neighbouring Vietnam and Thailand.
The shortfall has pushed China's domestic prices to above those in Vietnam, prompting traders to buy Vietnamese sugar, Pham Thi Sum, Chairwoman of Bien Hoa Sugar Co, was quoted by the agriculture ministry-run Vietnam Agriculture newspaper on Monday as saying.
"The export to China has temporarily stopped now as stocks in northern Vietnam are thin, while it costs more to move sugar from the south and sugar prices in Vietnam have risen," said Doan Xuan Hoa, a deputy director at the farm ministry in Hanoi.
"Now sugar is going to China via Vietnam as an imported item for re-export," Hoa told Reuters, confirming the paper's report that traders have now switched to buying Thai sugar, using Vietnam's northern port of Haiphong.
China, the world's most populous country, said in May it would release 250,000 tonnes of white sugar from state reserves, the first such sales this year, to help cover a supply gap and cool domestic prices.
"China's sugar supplies are very tight at the moment since we're now in the peak sugar demand season, with soft drink manufacturers buying more sugar to keep up with demand for cold drinks," said Wang Zhili, an analyst at Nanhua Futures Co.
"Considering Vietnam and Thailand both have abundant supplies, it is likely that Chinese buyers are entering the market to take advantage of cheaper import prices."
Boosting reserves could be done either by private firms or the government, Wang added. Private buyers are only entitled to 30 percent of China's 1.945 million tonnes of annual import quotas.
White-sugar futures on China's Zhengzhou Commodity Exchange have jumped 42 percent from a year ago to 7,173 yuan ($1,110) a tonne, while spot sugar hovered at 7,300 yuan per tonne.
China's 2010/2011 sugar output is expected to slip to 10.5 million tonnes, from 10.74 million tonnes last year, government officials said. Some analysts have estimated China would face a deficit of 3 million tonnes this year.
Sugar futures prices are expected to stay fairly strong in the near term on worries over Brazilian output and port congestion, but prices should ease in the fourth quarter as new harvests roll in.
Vietnamese raw sugar rose to 18 million dong ($876) a tonne now from 16-17 million dong in May due to purchases for the Chinese market, the Vietnam Agriculture newspaper said.
China has bought around 100,000 tonnes of sugar from Vietnam, nearly 10 percent of the Southeast Asian country's sales from its latest crushing season, a state-run newspaper reported on Saturday.
"China's falling sugar output was not a new issue as we have sold significant amount of sugar to China during the first quarter of this year," said an official at Thai Sugar Millers Association.
But traders in Bangkok said Thailand was unlikely to be a major sugar supplier for China this year, as most of the sweetener have been sold, mainly to traditional clients in Asia.
Between January and June 2011, Thailand shipped 170,000 tonnes to China, versus 23,000 tonnes for the whole of last year, data from the Thai Sugar Millers Association showed. China imported 190,000 tonnes of Thai sugar in 2009.
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