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Tate & Lyle Sugars reiterates its call for abolition of sugar import duties

19 January 2014

At the ISO 22nd International seminar on 26 November 2013, a presentation by Tate & Lyle Sugars (TLS) called for the EU to accept the “abolition of import duties alongside beet quotas” as a “long-term solution” and, in the interim, to eliminate the import tariff on so-called CXL sugar imports (30% of current supplies to EU cane refiners). CXL suppliers include highly competitive suppliers such as Brazil and Australia. Such a reform would “give refiners greater access to raw sugar and increase competition in the market”. In this context, the TLS presentation highlighted the growing corporate concentration in the EU sugar sector (with the top 7 producers accounting for 81% of the EU sugar market).

Corporate concentration in the EU sugar market: Percentage of EU27 sugar production from beet and cane

Südzucker British Sugar Nordzucker Tereos Cristalco Pfeifer & Langen Royal Cosun
24% 14% 12% 10% 8% 7% 6%

Source: Tate & Lyle Sugars, ‘EU sugar after 2015: Consequences of the new regulations’ (see below)

The presentation noted that the current partial nature of the reforms introduced means that “EU refiners will still be restricted to imports from nations that have preferential agreements”, with the duties levied on sugar sourced from non-preferential suppliers undermining the competitiveness of traditional sugar cane refiners. According to a TLS representative at the seminar, “what tends to happen is that the ACP countries price up the world market level plus €98 a ton as they know that’s what the floor price is for imports.”

At the pricing levels that EU import duties give rise to, the TLS representative commented that the survival of TLS “is extremely, extremely precarious”. This is promoting a situation where “Tate & Lyle is operating at 65% of its 1.4 million to 1.5 million tons capacity at its factories in London and Lisbon.” TLS representatives argue that “EU sugar prices, which fell 6.8% since reaching a record in January, to €688/ton in September, will continue to tumble after quotas end, as beet producers release supplies and compete for market share.” The lower market prices that are likely to result “will make it harder for refiners to import from preferential nations, as the cost of production in many is at about 30 cents a pound.”

The TLS presentation acknowledged that these further policy reforms “will be unpopular with those who currently benefit”, but argued that the wider benefits in terms of levelling the playing field between European sugar manufacturers, ensuring continued competition on the EU market, reducing inflationary pressures and ensuring consumer choice “far outweigh costs”. 

Editorial comment

A major challenge facing TLS is that existing EU sugar sector reforms have seen investment by beet refiners in 1.85 million tonnes of co-refining capacity. Many of these companies, which carry their overhead costs on their beet processing operations, can process raw cane sugar at low marginal cost and can therefore afford to pay better prices for raw cane sugar from preferred supplies.

This has seen a number of highly competitive sugar ACP sugar producers selling their raw sugar to co-refiners, rather than to traditional raw cane sugar processors. This, in addition to the closer corporate integration of competitive sugar producers in Southern Africa with TLS’ traditional UK competitor, British Sugar, has greatly exacerbated TLS’ supply problems.

These changes, along with the underlying economics of competition in the EU sugar sector outlined in the TLS presentation, underpin the calls for a broadening out of duty-free access beyond traditionally preferred suppliers (i.e. ACP/LDC suppliers).

However, from an ACP perspective, the critical question arises as to the long-term commitment of the new beet co-refiners to refining raw cane sugar, once EU production quotas on the use of beet in sugar manufacturing and isoglucose production have been lifted.

The challenge facing ACP raw sugar exporters is to identify the basis for establishing longer-term relationships with specific EU sugar refiners for the refining and marketing of cane sugars.

One potential basis is linked to specific markets such as fair-trade-certified sugars, for which there is likely to be no increased direct competition from expanded sugar production from beet or substitution of isoglocuse for sugar. However, the extent of this market this will depend on the success of efforts to promote fair-trade-labelled, direct-consumption sugars and fair-trade labelling requirements for multi-ingredient products (see Agritrade article ‘ Fairtrade certification for multiple-ingredient products to be modified’, 20 January 2014). 

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