IKAR in Mass and Industry Media

Russia imposes seasonal raw sugar duty Dec 1

Interfax

MOSCOW. Dec 3 (Interfax) - Russia imposed a seasonal import duty on raw cane sugar effective December 1, as prescribed by a government resolution signed by Prime Minister Viktor Zubkov on October 12.

The seasonal duty will be $220 to $270 per tonne, depending on world prices in the period from December 1 to May 31 next year.

If the average month price is at least $198.43 per tonne (determined as the average price on the New York Mercantile Exchange in the previous three months), the duty will be $220 per tonne, compared to the current duty of $140 per tonne. With an average price of $182.99 to 198.42, the duty will be $235, up from $164; and with a price of $99.22 to 182.98, the duty will be $250, up from $180. The upper limit of the duty - $270 at a price of up to $99.21 per tonne - has been left unchanged.

The seasonal duties will be lifted ahead of schedule if Russia should join the World Trade Organization, or if the average monthly price for raw sugar in New York exceeds $259.99 per tonne.

The seasonal duty is being imposed at the suggestion of the Russian Sugar Union. Experts argued that the duty system in effect since 2004 did not provide sufficient protection from excessive raw sugar imports. But data from the Agrarian Market Institute (IKAR) show that imports have increases sharply in anticipation of the duty. Some 1 million tonnes of raw sugar have cleared customs since August, compared to 560,000 tonnes in the same period last year.

IKAR chief analyst Yevgeny Ivanov said the seasonal duty has not only complicated the short-term prospects for the development of the domestic sugar market, but also pushed back the resolution of a number of serious long-term problems in the area of raw sugar imports.

The short-term problems include oversupply on the domestic market, which will begin to disperse in February at the earliest; additional financial expenses of companies related to speculative freight premiums, inflated raw sugar prices and the like; and less efficient operation of mills that refine domestic sugarbeet, Ivanov said.

One of the main problems for the sugar market - the inappropriate scale according to which the import duty is set - remains unresolved, he said.

"The sector needs a long-term, not seasonal regime of protection from imports with a level of support of $570-$630 per tonne, effective in the broadest possible range of exchange quotes for raw sugar of 7 to 20 cents per pound," Ivanov said. The scale for setting the duty that existed until December 1 provided for a quote range of 4.49 to 9 cents per pound.

Problems related with sugar imports from the CIS also remain unresolved for the Russian market, Ivanov said.

"Belarus, which is constantly trying to increase its quota, is supposed to ship 100,000 tonnes of white sugar in 2008, and in January 2009 there is a good chance that the gates will be opened for beet sugar from Ukraine," he said. In addition, there are still "customs holes" in the sugar regime, including the Kaliningrad exclave, he added.

The head of the Sugar Union, Andrei Bodin said the seasonal duty provides substantial support for the industry. However, there is again uncertainty ahead - if Russia joins the WTO, it will not be able to impose the seasonal duty and quantitative restrictions are banned, while the level of import duties combined with the current rate of the dollar do not ensure the competitiveness of domestic production.

Bodin said that the federal authorities and industry associations must develop procedures for rapid application of effective customs tariff countermeasures to protect domestic producers for the most sensitive import-substitution sectors of agriculture, which see sharp declines in competitiveness due to global economic influences, including the appreciation of the national currency.

04.12.07

All viewing: 109
Discuss