Tate & Lyle Urges EU to Abolish a Sugar Duty as Bloc Quotas End

The European Union should abolish a duty on imports of sugar from a group of nations including leading producer Brazil and Australia to ensure a more balanced market after quotas end, according to Tate & Lyle Sugars.

While limits that curb the amount of sugar beet producers can sell in the domestic market will end in 2017, EU refiners will still be restricted to imports from nations that have preferential agreements with the bloc. Abolishing the 98 euros ($133) a metric ton duty on shipments from nations such as Australia, the third-biggest exporter, and Brazil would give refiners greater access to raw sugar and increase competition in the market, the company said today in a letter to the European Commission, the bloc’s regulatory arm.

The EU imports sugar duty free from some so-called least developed nations and some countries in the African, Caribbean and Pacific group of states. A further 667,000 tons of raw sweetener can be brought in under the 98-euros duty. EU supplies trailed demand in the past three seasons as shipments from preferred nations fell short of the bloc’s forecast, sending local prices to a record 738 euros a ton in January.

“What tends to happen is that the ACP countries price up to the world market level plus 98 euros a ton as they know that’s what the floor price is for imports,” said Tony Bennett, government affairs and strategy manager at Tate & Lyle, owned by American Sugar Refining Inc. “With that duty on there, our survival is extremely, extremely precarious.”

London, Lisbon Factories

Tate & Lyle is operating at 65 percent of its 1.4 million to 1.5 million tons capacity at its factories in London and Lisbon, Bennett said. Imports that fall under the so-called CXL duty of 98 euros account for 30 percent of EU cane refiners’ supplies. Imports outside EU trade agreements usually incur a duty of 339 euros a ton for raw sugar and 419 euros for the white, or refined, variety.

Imports under CXL are a World Trade Organization quota, which expanded after Finland joined the EU in 1995, according to the commission. The 98 euros tariff corresponds to a conversion from the then Finnish currency of the duty charged at the time, the commission said. Finland joined the euro zone in 1999.

“The calculation is completely out of date,” said Bennett of Tate & Lyle, which has about 850 employees at its London facility and another 350 in Lisbon. “It’s from an era of intervention and therefore it needs to be reviewed.”

Preferential Nations

EU sugar prices, which fell 6.8 percent since reaching a record in January, to 688 euros a ton in September, will continue to tumble after quotas end as beet producers release supplies and compete for market share, Bennett said. Lower prices 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, he said. That’s 73 percent higher than the 17.33 cents a pound close in New York yesterday.

“If the ACP, LDC countries can’t get their cost of production down, we will die with them,” Bennett said. “If they can get their cost of production down, then we’ve got a chance. We have to be allowed to buy from other sources as well duty free so that our average cost of production is competitive with the isoglucose and beet supply,” he said, forecasting that production of the sweetener made from cereals will also expand when quotas end.

Before it's here, it's on the Bloomberg Terminal.