April 19 (Bloomberg) -- An end to sugar quotas in the European Union, expected by the EU Council as early as 2017, may promote trade of the sweetener within Africa as Ethiopia and Nigeria plan to raise output, said Ecobank Transnational Ltd.
“There is a deficit of sugar in Africa, yet producers still export to Europe and import from Brazil,” Edward George, head of soft-commodities research at Ecobank, said in an April 17 interview in Kenya’s capital, Nairobi. “This will change if and when Europe bans quotas.”
Producers in the EU, the world’s largest sugar importer, can by law only sell a limited amount in the common economic area, and some local demand must be met by duty-free shipments from African, Caribbean and Pacific states that have preferential access to the market. Africa produces less than it needs, according to the International Sugar Organization.
The council, which represents governments of EU member states, wants an end to quotas in 2017, while the European Commission, the bloc’s regulatory arm, has proposed limits should end two years earlier. The European Parliament voted to extend them to 2020. All three are negotiating the quotas from April 11 to June 20, Martin van Driel, team leader for sugar at the commission, said yesterday.
The curbs restrict sales to 13 million metric tons in the 27-nation bloc, which has faced sugar shortages in the past two seasons after imports from nations with preferential accords fell short of estimates. The EU will produce 17.6 million tons of sugar in the 2012-13 season that starts in October, the Commission said in a June 28 report on its website, 19 percent less than a year earlier.
“If the ban is effected, and European producers increase production, we will be crowded out of that market,” Devesh Dukhir, chief marketing officer at the Mauritius Sugar Syndicate, said in an interview in Nairobi. Most of the Indian Ocean island nation’s output goes to the EU.
Raw-sugar imports from ACP nations cost an average 620 euros ($810) a ton in January, according to the commission. That was the second-highest price since at least 2006 and 63 percent above the average of the white-sugar futures traded on the NYSE Liffe exchange in London that month.
Raw sugar for July delivery climbed for the first time in three days, advancing 0.6 percent to to 17.71 cents a pound at 3:08 p.m. in London.
Africa produced 6.85 million tons of sugar in 2008-09, less than the 8.7 million tons it consumed, Peter Baron, executive director of the International Sugar Organization, said in Nairobi on April 15. Consumption in the sub-Saharan region could reach 11.8 million tons by 2020, he said. Illovo Sugar Ltd., the Mount Edgecombe, South Africa-based company that is the continent’s biggest producer, also has operations in Tanzania, Swaziland, Malawi and Zambia.
Ethiopia wants production to exceed 2 million tons by 2020 from 300,000 tons now and has set up a fund to pay for expansion, said Shimelis Kebede, the deputy director general of planning and projects at Ethiopia Sugar Corp., the state-run sugar company.
“We expect to double our fund, which is currently 4.5 billion birr ($243 million), in two to three years,” Kebede said in an April 17 interview in Nairobi.
The Horn of Africa nation, which imports the sweetener, wants to be one of the world’s 10 biggest exporters by 2025. It plans to build 10 sugar-producing plants that can also make other cane by-products such as ethanol and electricity by 2020, he said. Each plant may cost $170 million, he said.
Sugar Corp. said Sept. 26 it signed agreements with state-owned China Development Bank Corp. for $500 million in loans to build two refineries.
Nigeria, which has sub-Saharan Africa’s second-biggest sugar refinery in Lagos, will expand its fund for development of the crop to as much as 6 billion naira ($38 million) this year, Hezekiah Kolawole, the acting director for planning at the National Sugar Development Council, said in an April 15 interview in Nairobi
“In a couple of years Nigeria will turn from a net importer to exporter of sugar, just like it did with cement,” Ecobank’s George said.
Dangote Group, owned by Africa’s wealthiest man, Nigerian Aliko Dangote, controls Africa’s largest cement manufacturer and the Lagos sugar refinery.
Nigerian importers of the sweetener have had to pay a levy on incoming shipments since January, with proceeds going into the fund, Kolawole said.
The country, which produces 40,000 tons of sugar now, plans to raise output to meet annual consumption of 1.1 million tons, Ecobank’s George said.
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