Casuco in early July sent a document to Hau Giang provincial leaders about the suspension of Vi Thanh, one of its two refineries in the province.
With the move, Casuco has prolonged the list of sugar refineries which havehalted operation recently.
The reason behind the closure of so many sugar mills is ineffective operation. As farmers have given up cultivating sugar cane and shifted to grow other crops, refineries cannot collect enough materials to run.
|The reason behind the closure of so many sugar mills is ineffective operation. As farmers have given up cultivating sugar cane and shifted to grow other crops, refineries cannot collect enough materials to run.|
Prior to that, Hiep Hoa Refinery in Long An province also had to close. The Binh Dinh sugar mill has been suspended for the last many years. Both mills still owe money to farmers and it’s unclear when they can pay debts.
Meanwhile, Thanh Thanh Cong Sugar (TTC) has halted the operation of Nuoc Trong Sugar mill for restructuring. Sources said the mill may shift to produce organic sugar instead of refined sugar in order to improve competitiveness.
According to the Vietnam Sugar Cane and Sugar Association (VSSA), the number of sugar plants in the countries was cut from 46 to 42 in 2017 and to 36 recently. Many plants maintain their operation, but at moderate level, so it is difficult to predict how many plants would still survive the 2019-2020 crop.
Vo Tong Xuan, a respected agriculture expert, said the difficulties of sugar plants are foreseeable. A series of sugar plants have been shut down in other countries and territories in the world.
In Taiwan, 39 plants have closed, while only three plants still existing, refining white sugar from brown sugar imported from Australia and Thailand.
In other countries, the land for sugar plants and sugar cane farming has been used for real estate projects and other crops to create biomass that serve electricity plants.
In Vietnam, the production cost of one ton of sugar cane is high at $50, uncompetitive with Brazil ($16), Australia ($18) and Thailand ($30).
One of the reasons cited by VSSA to explain the difficulties the sugar industry is facing is the smuggling.
Sugar has been brought to Vietnam across border gates which don’t bear tax. The smuggled sugar is sold at the Vietnam-Thailand border gate at VND8,000 per kilogram and retailed at VND10,000. Meanwhile, Vietnam’s sugar retail price is VND18,000-20,000 per kilogram.
The big price gap between Thai smuggled and Vietnam’s sugar leaves unsold domestic products. A report showed that the current inventory level is high, about 600,000 tons.
Experts warned that the situation of the sugar industry may be even worse in the future. From 2020, under the ATIGA, which will take place after two years of postponement, the imports will bear zero tax tariff.
The area under sugarcane in the Cuu Long (Mekong) Delta has shrunk dramatically during the 2019-20 crop after many farmers switched to other crops following losses in recent years.
The sugar industry is experiencing stormy days as prices have dropped dramatically. However, some companies are thriving and plan to ‘swallow’ their rivals.