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Nordzucker looking for new international investment opportunities

10 May 2014

Unconfirmed reports suggest that “Germany's second-largest sugar refiner Nordzucker is planning to build a sugar refinery in Zambia at a cost of about $300 million,” with plans to develop a mill to produce raw sugar reportedly at an “advanced stage”.

A company spokesperson for Nordzucker declined to comment on reports specifically related to potential investments in Zambia, but confirmed to Reuters that the company “is intensively examining opportunities to invest in the international sugar market”. She said that, in view of “the limited chances for expansion in Europe at a time of rising European production and the end of [EU] sugar market regulation from 2017…, Nordzucker is looking at attractive growth areas such as Africa and Asia, where, in contrast to Europe, demand for sugar is increasing significantly.” She added that “the aim is to begin raw sugar production in these regions, possibly with local or international partners.”

Since 2005, Nordzucker has been undergoing a process of restructuring and market repositioning in response to EU sugar sector reforms, as a part of which the Nordzucker Group “surrendered 413,000 tonnes of sugar quota”.

The restructuring saw Nordzucker acquire Nordic Sugar from DANISCO in 2009. As a result of the acquisition, Nordzucker inherited an established relationship with ACP sugar exporters, refining raw cane sugar at the Nordic Sugar facilities in Arlöv (Sweden) and Porkkala (Finland), both of which have direct access to the Baltic Sea. In addition, Nordzucker “installed a plant to refine raw cane sugar at its site in Chelmza (Poland) in order to expand its raw material base”. The first raw cane sugar processing took place at Chelmza from July to September 2008.

According to Nordzucker, “a key [criterion] when creating refinery capacities is the question of whether there is a local need for imported sugar, i.e. demand which cannot be met by beet sugar.” As the Chelmza facility is located close to Gdansk, in “[close] proximity to the deficit areas”, its location is seen as particular advantageous. The Chelmza facility also benefits from refining raw cane sugar as an “auxiliary activity” (alongside its beet processing activities), which reduces the costs of downtime during the season.

Nordzucker’s facilities in Sweden, Finland and Poland, are seen as being “strategically well-placed sites for refining raw cane sugar”. Collectively, the three sites have the capacity to process 300,000 tonnes of raw cane sugar. As early as 2008/09, the company saw Eastern and Southern Africa as offering particularly attractive prospects for raw cane sugar procurement, following positive International Sugar Organization assessments of these regions. 

Editorial comment

While the combined direct raw cane sugar imports to Poland, Sweden and Finland from ACP sources have increased from under 58,000 tonnes in 2009/10 to 120,000 tonnes in 2011/12, there would still appear to be considerable scope for expansion of raw cane sugar refining in Nordzucker facilities, if access to raw cane sugar from preferred suppliers can be obtained. This provides the context for current reports on potential Nordzucker investment in Zambia.

However, the Zambian sugar sector is currently dominated by Illovo (producing 90% of national output). Illovo is partly owned by Associated British Foods (ABF), which owns the major UK sugar producer British Sugar. It is unclear whether Nordzucker would be linking up with other sugar producers in Zambia as a way into the country. An expansion of non-Illovo-owned sugar production capacity could bring benefits domestically in Zambia, where the dominance of Illovo Zambia has led to accusations of unfair pricing, with Zambian sugar consumers paying prices quite disproportionate to the production costs of sugar in the country.


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