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african sugar market update – september 2012

ssa’s sugar imports plummet in 2012

according to estimates by the iso, ssa’s imports of sugar fell sharply in 2012, contracting by 8.3% to 4.4m mt, as production across east and southern africa recovered strongly. the sharpest fall was recorded in ghana, whose imports fell by 35% to 300,000 mt, repeating the erratic pattern of imports over the past decade. angola experienced a fall of 23.2% to 225,000 mt, as domestic production rose to 100,000 mt. once production starts at the sugar plantation and factory in cunene province that is being developed by the japanese trading house, marubeni, the country should be able to meet domestic demand and could start exporting to the regional market. however, developing sugarcane plantations for cogeneration and bio-fuel production could prove more attractive to the government. imports by ssa’s largest sugar producer, south africa, fell by 9.7% to 365,000 mt, while kenya’s fell 9.4% to 270,000 mt, reflecting the ongoing recovery in both countries’ sugar production following devastating droughts in both southern and east africa over the past two years. in sharp contrast, nigeria’s sugar imports rose by 4.1% to 1.1m mt, making it the largest sugar importer in africa with around a quarter of the region’s imports. nearlyall of of this sugar comes in raw form from brazil for refining in nigeria. however, dangote sugar’s plans to expand production of sugar at its subsidiary, savannah sugar company (ssc), to 1m mt by 2015 could radically alter the picture, potentially ending the
country’s need to import large volumes of raw sugar. looking to 2012/13 the iso expects the region’s imports to rebound by a modest 1.5%, to 4.462m mt, reflecting conflicting trends across ssa. in west africa nigeria is set to boost imports by a further 4.1% to 1.2m mt, and there will also be a surge in imports to kenya and tanzania, both of which re-export large volumes of sugar to the regional market. however, this increase will be offset by further reductions in imports by south africa and angola which are both expected to boost production next season. overall exports of sugar from ssa will remain broadly steady, at 2.5m mt, the majority of which is exported both
raw and refined to the eu and usa under preferential agreements.

new sugar plantation and refinery to be built in cameroon

a consortium of cameroonian and indian investors are to invest xof 60bn in a new sugar complex in cameroon, justin sugar mills (jsm), which aims to increase national production by over 50%. the complex will be located in bertoua, east region, and will comprise 155,000 acres of land with a factory producing 100,000 mt of white and brown sugar and 9m litres of molasses per year. the company also plans to produce bio-fuel (ethanol and alcohol), as well as to cogenerate 16 mw of power from waste material (bagasse) , 12.5 mw of which will be sold to the local community and national grid. the first production of refined sugar is due to start in january 2014, and in the medium term the company hopes to expand production to 500,000 mt and co-generation to 80 mw. coupled with expansion by the country’s only existing producer, sosucam (owned by france’s somdiaa), which plans to increase production to its full capacity of 175,000 mt by 2017, this should ensure cameroon has ample supplies to meet domestic demand of around 200,000 mt. however, given cameroon’s location as a key trade corridor into the central african region it is likely to increase its current official exports of just 25,000 mt per year to meet rising regional demand, and this could result in the country running a net sugar deficit.

kenya’s mumias to raise us$400m to expand production

kenya’s largest producer, mumias sugar, plans to raise us$400m to boost production capacity from around 250,000 mt to over 450,000 mt over the next three years. the project will involve a plantation of 16,000 ha and involve 4,000 outgrowers in kenya’s coastal region where cane grows faster than in the west. the deal is likely to involve a mix of debt and equity, but it is unlikely to be completed until after next year’s election. mumias hopes that by scaling up production in the coastal region it can increase profitability, as kenyan sugar costs on average us$570/mt to produce compared with just us$240-290/mt in egypt. but the company will need to clamp down on cane poaching from its plantations in busia region which resulted in losses of 400,000 mt of sugar cane last year. coupled with the impact of drought which further reduced cane availability, the company’s refined sugar production fell by 27% in 2011 to 172,615 mt. however, mumias expects the cane crush to rebound by 20% to 2.4m mt in 2012/13 (july-june), and the new project could increase the company’s share of national production to over two thirds.

sugar price outlook

after rebounding strongly in july, international sugar prices slumped in august, ending the month 12.6% lower at 19.8 us cents/lb in reaction to expectations of a strong brazilian harvest. with a sizeable global surplus is in prospect for 2012/13, thanks to strong production in brazil, india, russia and australia, we expect prices to remain under pressure over the coming months. however, should prices fall below 20 us cents/lb for a sustained period it could drive millers to turn more sugar cane into ethanol, reducing sugar supplies and driving up prices again.

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