Oct 18, 2012

Vietnam - Domestic sweets manufacturers refuse domestic sugar, prefer imports

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VietNamNet Bridge – Sweets manufacturers have been insisting on quotas for sugar imports. Meanwhile, domestic sugar refineries weep because of sugar is unsalable.

Domestically made sugar expensive

Vietnam expects to have the output of 1.5 million tons of sugar from the 2012-2013 crop, while it would consume 1.35 million tons.

Though the domestic sugar price has been on the decrease, the price is still 10-15 percent higher than that in regional countries.

According to Trinh Minh Chau, Deputy Chair of the Vietnam Sugar and Sugar Cane Association, Vietnam’s sugar cane has the lowest quality in the world, but its sugar price is always the highest. Especially, sugar cane materials gobble up to 80 percent of the total production costs.

The sugar refineries in the Mekong Delta have to spend 12,500 dong to buy sugar cane in order to make out one kilo of sugar. Meanwhile, Thai refineries only need 6000 dong.

The production cost of one kilo of sugar in Vietnam is 15,500 dong, while it is less than 10,000 dong in Thailand. This explains why Vietnamese food and sweets manufacturers refuse domestic products and insist on import quotas.

Truong Phu Chien, General Director of Bibica, a confectionary producer, said the domestic sugar prices fluctuate all the time, which makes it impossible for enterprises to set up their plans.

The prices could drop to 13,000-15,000 dong per kilo, and could be as high as 17,000-20,000 dong per kilo. Therefore, domestic sugar supplies would only be used for small and seasonal contracts.

Bibica, for example, buys 100 tons of sugar a month only, and it may place order with different plants.

An executive of Tan Hiep Phat Company also complained that the company needs 40,000-50,000 tons a year, the high volumes which cannot be satisfied by many refineries in Vietnam.

“We always hear that sugar runs out when we ask to purchase sugar. Meanwhile, the prices are always 15 percent higher than the world prices,” he complained.

Vietnamese enterprises don’t like Vietnam’s sugar?

The executive said that while they meet too many problems when buying sugar from Vietnamese refineries, they can make deals very easily with foreign exporters.

Domestic refineries always require high deposits from buyers. Meanwhile, this is not welcomed by clients – the businesses who have been struggling hard to survive the current difficulties.

According to Vu Quoc Tuan, a senior executive of Nestle Vietnam, when buying sugar from domestic refineries, the company has to pay 50 percent of the value of the consignments in advance. Meanwhile, if it imports sugar in accordance with the quotas granted by the Ministry of Industry and Trade, it has to pay 10 percent of the values of consignments in advance.

As such, domestic enterprises prefer importing sugar instead of using domestic products, because they can feel more secure with the flexible payment method and stable prices.

Tuan has affirmed that Nestle Vietnam’s sugar imports account for 60 percent of the total amount of sugar needed for the production.

Nguyen Thanh Long, Chair of the Sugar and Sugar Cane Association, said sugar cane crops in Vietnam always depend on the weather, while there has been no close cooperation between farmers and refineries.

Long said the association is persuading refineries to collect sugar cane from farmers before the flood season. However, refineries still keep hesitant to buy materials at this moment, since they see the prices going down. Meanwhile, most of the enterprises are incurring loss, and they would incur heavier losses if they buy sugar cane now at high prices.

Nam Phong

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