One of Asia’s biggest sugar refiners is in talks to sell the sweetener in China, lured 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, Executive Director 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 said in an interview at the company headquarters in Kuala Lumpur 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 performing commodities in recent years. The more-than 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 either, with dwindling sales leading to a quarterly loss and share prices tumbling to a record low on Monday.
MSM is hoping China can help turn things around. The refiner, the world’s sixth largest for standalone capacity at 2.25 million tons per year, sees China as Asia’s next biggest sugar market as the younger generation become increasingly busy and pick up easy to eat sugary snacks on the go.
Consumption in China is forecast to rise in the year ending September 2019 to more than 15 million tons, according to its ministry of agriculture, while the OECD forecasts the country to become the world’s leading sugar importer by 2027.
MSM also expects sugar prices to improve in the second half of 2019 as the global supply glut moves into a deficit, albeit a small one, according to Khairil. Raw sugar prices 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 of India’s sugar producing regions cuts into supplies, Khairil said. Sugar in New York traded at 12.76 cents a pound on Monday.
Recovering prices, as well as forecasts for a stronger Malaysian ringgit, should help MSM shore up cash for new investments, Khairil said.
“We’re looking for the market to balance out,” Khairil said. “A deficit in global raw sugar will give us a little breather.”