End of Protection Measures in Trade 

By CnAgri 2020-06-12 14:19:44 Print Tel:861064402118-822 Email: chen.wang@boabc.com

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By May 22nd, the three years duration protection measures for sugar import expired.As of the end of May, there was no formal official news for the continuation of the protection measures. Therefore, the tariff protection measures for sugar import implemented since 2017 come to a full stop for now, so tariff rate of China for extra-quota sugar import will be back to 50%.
The expiry of the protection measures has conspicuous impact on domestic spot price. Regarding spot trade, spot prices  in Liuzhou and in Nanning continue to slide after May 22nd. On May 29th, spot prices in Liuzhou and in Nanning were 5435 yuan/ton and 5395 yuan/ton respectively, down by 60 and 65 yuan respectively from May 21st. Regarding future price, trading price for contracts in 2009 had seen repeated tumbling in the 4930-5050 yuan/ton range. Shortly after the opening of the night session of the market on 22nd, trading price fell to a new low of 4938 points.
The price fall is mainly attributable to the following: a) After the expiry of protection measures in trade, domestic sugar will be subject to impacts from cheap sugar from overseas. If calculated by tariff rate of 85% for extra-quota sugar import, the estimated price of raw sugar import from Brazil will be 4860 yuan/ton; if calculated by tariff rate of 50% for extra-quota import, the estimated price of raw sugar import from Brazil will be 4,006 yuan/ton, and the price difference with spot price will be around 1,400 yuan/ton. So there is great price disparity between domestic price and overseas price. b) Due to impact from Covid-19 crisis, sugar consumption withered. Coupled with the expiry of trade protection measures, views on market trend are generally negative.
The ultimate reason why China tends to suffer from impact from sugar import is that we have higher production cost, lower degree of mechanization, lower yield, etc. The intention for the implementation of protection measures in sugar import trade had been to enhance the competitiveness of domestic sugar industry in a couple of years. However, domestic sugar industry still grows at a slow pace. After import tariff is restored to 50%, cheap sugar import from overseas will deal an negligible blow to the domestic market, given the existence of multiple control policies.
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