VietNamNet Bridge – Sugar companies have begged for the government’s urgent interventions in terms of tax rates, sugar import quotas, trade fraud control and cross-border exports to protect domestic enterprises which are at the death point.

Bui Thi Quy, President of the Long My Phat Sugar and Alcohol Company in Hau Giang province, on December 4 affirmed that the company has shut down the sugar refinery.

The other sugar refineries in the Mekong Delta provinces have been operating at a moderate level. The Vietnam Sugar and Sugar Cane Association has called for the government’s urgent help.

Quy said that the domestic sugar prices have dropped dramatically. As a result, the more the refinery put out, the bigger loss it suffered.

At present, the production cost of every kilo of sugar is 13,500 dong. If counting on the expenses on inventories and bank loan interest rates, a kilo of sugar would bear the cost of 500 dong more. Meanwhile, sugar companies just can sell at 13,700 dong per kilo.

“We had to borrow money at overly high interest rates, while we had to sell sugar at low prices. The high inventories have made the sugar production costs higher, which then would make it even more difficult to sell,” Quy said, explaining the vicious circle that sugar companies have fallen into.

“So, we have decided that it would be better to halt the production, and we would only open the refinery again when the sugar prices go up,” Quy said.

Nguyen Thanh Long, Chair of the Vietnam Sugar and Sugar Cane Association, said Long My Phat is not the only sugar refinery that meets difficulties.

By the end of November 2012, the inventory volume had reached 110,000 tons, or 60 percent higher than that of the same period of the last year.

Though it is now the high sale season, the wholesale prices in Mekong Delta are hovering at 13,700-14,600 dong per kilo only, or 4000 dong per kilo lower than that of the same period of the last year. Most sugar refineries said they incur the loss of 500-1000 dong per kilo when selling at the price levels.

The sugar price has tumbled because of the sharp fall of the demand for sugar for making food, estimated by 15-20 percent.

However, sugar refineries and traders have been blamed this on the smuggled sugar imports from Thailand which are cheaper than domestic products.

A kilo of Thai sugar is now retailing at 13,800 dong per kilo, which explains why domestic products have been left unsold.

“Long My Phat has shut down its refinery. Meanwhile, the plants in Ben Tre, Tra Vinh, Soc Trang and Hiep Hoa have been operating at a moderate level,” Long said.

In its document to the government, the sugar association begged for the government’s urgent interventions in terms of tax rates, sugar import quotas, trade fraud control and cross-border exports.

Especially, the association emphasized that the failure in preventing smuggled imports from entering Vietnam has put big difficulties for domestic sugar refineries.

It is estimated that 400,000-500,000 tons of smuggled sugar would be brought to Vietnam this year, which is equal to 30 percent of the domestic total capability. The imports which have been sold at the prices lower than domestic products have been dominating the southern market and a part of the northern market.

In fact, sugar refineries are believed to shut down sooner or later. If they do not stop production now, they would have to do this after Vietnam opens the market under the AFTA commitments and reduces the import tariffs, slated for 2017.

SGTT