Sugar stocks (SBT) gain from India's export curbs

Aug 28th at 10:56
28-08-2023 10:56:14+07:00

Sugar stocks (SBT) gain from India's export curbs

Sugar stocks all posted a weekly gain last week after India is expected to ban sugar exports in the next season starting in October.

Sugar cane harvesting at a farm of Lam Sơn Sugar JSC. —Photo

The move is the first in seven years due to a lack of rain, cutting cane yields.

Reuters citing a government source stated that New Delhi's primary focus is to fulfil local sugar requirements and produce ethanol from surplus sugarcane.

However, due to unfavourable weather conditions, the country will not have enough sugar for export in the upcoming season.

India allowed mills to export only 6.1 million tonnes of sugar during the current season to September 30, after shipping a record 11.1 million tonnes last season. In 2016, India imposed a 20 per cent tax on sugar exports to curb overseas sales.

After the news was reported, investors’ interest shifted to sugar stocks, with all shares traded on three stock exchanges soaring on August 24, of which three out of five ticker symbols hit the ceiling prices.

Specifically, shares Thành Thành Công - Biên Hòa JSC (SBT) and Lam Sơn Sugar JSC (LSS) traded on the Hồ Chí Minh Stock Exchange (HoSE) jumped 7 per cent, while Kon Tum Sugar (KTS) on the Hà Nội Stock Exchange (HNX) logged the biggest daily gain of 10 per cent.

Sơn La Sugar JSC on HNX and Quảng Ngãi Sugar JSC (QNS) on UPCoM also surged 7.4 per cent and 6.5 per cent, respectively.

Despite the market correction in the last trading session of the week, sugar stocks still tasted sweet, with SBT, LSS and KTS up in a range of 0.6-5.3 per cent.

For the week, sugar shares registered increases of 5-11.1 per cent, of which KTS grew the most, up more than 11.1 per cent.

Opportunities from rising prices

Concerns about scarce supply weighed on global food security, pushing sugar prices to hover at 11-year highs.

Movements of raw sugar prices in the global market (cents/pound). Source:

The price of raw sugar in the US was last quoted at 24.83 cents per pound, a gain of 26.4 per cent over the beginning of the year.

Higher sugar prices on the international market is one of the drivers boosting domestic sugar stocks.

According to the Vietnam Sugarcane Association (VSSA), domestic sugar production is expected to reach 871,000 tonnes, up 16.6 per cent for the year 2022/23, while sugar prices are set to remain high and in line with the global sugar prices in 2023 as imported sugar accounts for two-thirds of the country’s sugar supply.

Meanwhile, a report from the US Department of Agriculture said that Việt Nam’s sugar consumption in 2023 is estimated at nearly 2.4 million tonnes, an average of nearly 200,000 tonnes a month.

As a result, the amount of sugar produced domestically can only meet four months of consumption demand and the sugar import quota this year is about 319,070 tonnes.

This means domestic sugar outputs and officially imported sugar can only meet 50 per cent of demand in 2023.

Therefore, the Government Office has just issued an express dispatch to the Ministry of Industry and Trade (MoIT) and the Ministry of Agriculture and Rural Development on proposal to purchase an additional 600,000 tonnes of sugar from international markets.

This will benefit domestic refineries that have to import raw sugar.

KB Securities Vietnam JSC (KBSC) forecasts that the price of cane sugar will continue to stay at a high level, supporting the growth momentum of sugar producers in the country and in the world before entering a clearer correction phase.

In a recent report, SSI Research also said that the price of refined sugar will remain around VNĐ20,000 per kg (US$0.83 per kg), up 12 per cent year-on-year, starting the second quarter of 2023.

Anti-subsidy and anti-dumping policies applied to Thailand's sugar to protect domestic enterprises are other drivers contributing to long-term improvement of domestic sugar production and sugar prices.

Even though the Ministry of Finance is consulting on the excise tax on sugary drinks with the draft revised Law on Special Consumption Tax to be submitted to the National Assembly in May 2024, SSI Research believes that the excise tax will have little impact on domestic sugar consumption.

Therefore, it believes that business results of the sugar industry will develop positively in the future.

In four quarters of the fiscal year 2022/23, sugar producers posted mixed business results. In particular, Lam Sơn Sugar and Thành Thành Công - Biên Hoà reported losses of 78 per cent and 66 per cent on-year, respectively, in their profit after tax.

On the contrary, Quảng Ngãi Sugar, Sơn La Sugar and Kon Tum Sugar all recorded strong growth of up to 620 per cent year-on-year.

The fiscal year of the sugar industry starts from July 1 of the previous year to June 30 of the next year. 




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