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The Chinese sugar market is known to be one of the major global producers and consumer of sugar, ranking No. 3 and No. 2 in sugar output and consumption respectively in 2011.
Sugarcane serves as principal raw material for sugar production and contributes more than 90% to the sugar output. In 2011, the output of China's sugar grew by 5.8% Year-on-Year to 11.7 million tons.
China has become a major sugar-consuming country along with increases in consumer incomes and the rapid development of many downstream industries. Chinese and global sugar markets are integrated, and world price fluctuations can affect China's domestic sugar market. Despite price fluctuations and local shortages, sugar demand by Chinese consumers is steadily growing. Growth is being stimulated by increased use of sugar as an ingredient in food and beverage products, as well as an additive to foods and drink.
During 2009-2010, southern China experienced its worst drought in history, resulting in a significant cut of sugar cane production. Sugar production dropped significantly and sugar prices continued to rise. International sugar prices also rose sharply for top producing countries suffered from various climatic disasters, leading to sugar output cut.
Since last October, China's sugar prices have risen substantially in the context of tight sugar supply, international sugar price rise and China's macro-economic background, making the main sugar futures contract prices exceed RMB 7,500/mt and Nanning spot price even advance to RMB 7600/mt.
The leading sugar manufacturers in China include Nanning Sugar Industry Co., Ltd., Guangxi Guitang (Group) Co., Ltd. and COFCO Tunhe Co., Ltd., etc. In 2011-2012, as increased purchasing costs of sugarcane and falling sugar price shrank profit margins of the enterprises, the majority of sugar producers suffered a declining profit.
Taking Nanning Sugar Industry for example, the revenue of the company rose by 9.0% Year-on-Year to RMB4.22 billion, and its net income plummeted by 73.5% Year-on-Year to RMB45.4 million in 2011.
The Chinese sugar market is in the mature phase of its life cycle. After years of strong development, the industry is expected to experience slower growth, with value-added increasing at an annualised rate of 9.1% over the next five years, in line with China's GDP's growth over the period.
For more information on the Chinese sugar market, see the latest research: Chinese sugar market
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