One of Asia’s biggest sugar refiners is in talks to sell the sweetener in China, seduced by the country’s “new generation” of consumers.
MSM Malaysia Holdings Bhd is nearing the final stages of discussions to set up partnerships in China’s downstream sugar industry, ED Datuk Khairil Anuar Aziz said. The refiner is looking to sell sugar for popular snacks such as bubble tea, health drinks and bread, as well as healthier sweeteners, condensed milk and molasses used in alcohol.
There’s “opportunity if you really blend it with the current lifestyle of people” in China, Khairil Anuar said in an interview at the company headquarters in Kuala Lumpur (KL) last week. “We really want to provide sugar to all these different industries — bakeries, bubble tea, healthy drinks. The demand is there.”
MSM’s wager on China follows a tumultuous time for the global sugar market, which has been one of the worst performers in recent years. The morethan 40% plunge in futures in the past two years has hurt firms from Germany’s Suedzucker AG to major Singaporean food trader Olam International Ltd. MSM hasn’t gone unscathed, with dwindling sales leading to a quarterly loss and shares tumbling to a record low on Monday. MSM shares in KL rose as much as 4.7% to RM1.77 yesterday.
MSM is hoping China can help turn things around. The refiner, the world’s sixth-largest for standalone capacity at 2.25 million metric tonnes per year, sees China as Asia’s next biggest sugar market as the younger generation becomes increasingly busy and picks up easy to- eat sugary snacks on the go.
Consumption in China is forecast to rise to more than 15 million tonnes in the year ending September 2019, according to the Ministry of Agriculture, while the Organisation for Economic Cooperation and Development sees the country becoming the world’s top sugar importer by 2027.
The Chinese are also munching more snacks, helping drive sugar usage. Euromonitor International sees snack consumption expanding by 13% to 13.5 million tonnes by 2023 from this year.
MSM expects sugar prices to improve in the second half of 2019 as the global glut moves to a deficit, albeit a small one.
Raw sugar for export may average 14 cents a pound this year as Brazil converts more of the commodity into ethanol and crop-unfriendly weather in some Indian producing regions cuts supplies, Khairil Anuar said. Sugar in New York was at 12.68 cents on Monday. Recovering prices, as well as forecasts for a stronger Malaysian ringgit, should help MSM shore up cash for new investments, Khairil Anuar said.
“We’re looking for the market to balance out,” Khairil Anuar said. “A deficit in global raw sugar will give us a little breather.” — Bloomberg