Imported sugar swords specify price rights

"As of mid-August 2013, the average spot price of sugar in Guangxi was about 5320 yuan / ton, the lowest had fallen to about 4800 yuan / ton. Sugar companies walk around the loss line, miserable." A sugar company in Guangxi responsible person I sighed and sighed when I told a reporter from the China Securities Journal about sugar conditions.

China Sugar Association's data show that as of the beginning of August, Yunnan Province's sugar crop is estimated to have a loss of 910 million yuan, with an average loss of 470 yuan per ton of sugar. Not only is the loss of small and medium-sized sugar companies serious, but also the strength of large-scale sugar companies. The two domestic sugar listed companies, Guishan Sugar and Nanning Sugar, recently released their mid-year reports, showing that the former had a loss of 48.423 million yuan in the first half of the year, and the latter had a higher loss of 120 million yuan.

"The main reason for the serious sugar losses is the large increase in the amount of imported sugar, which has led to a drop in domestic sugar prices, which is approaching or even lower than the cost of sugar companies," said Huang Shanghai, a researcher at Changjiang Futures.

For a long time, there has been a gap between supply and demand for sugar in China. Since 2008/09, self-produced sugar has been unable to meet domestic demand for four consecutive years and has directly created a bull market where sugar prices have doubled. Due to the supply gap, imported sugar has become an important supplement to domestic demand. "But I did not expect that the import of sugar, 'foreign households,' has rushed into the country and constantly eroded the profit margins of domestic sugar companies. This war of invisible smoke has already started!" Some people in the industry described it vividly.

Since 2010/2011, China's sugar imports have increased year by year. In 2011/2012, the import volume reached 4.26 million tons, which doubled from the same period of last year and became the world's largest sugar importer. From 2012/2013 to July, China has imported 2.5 million tons of raw sugar, which is expected to reach 3.3 million tons in the whole year, putting a lot of pressure on domestic sugar prices.

"The main reason for the sharp increase in the amount of imported sugar is the high domestic and foreign price spreads, and the huge profitability of imports. Even if we pay 50% of the tariff and add additional raw sugar, it will still be profitable," said Gao Wang, an analyst at Galaxy Futures, in recent years. The reasons for the high price difference between home and abroad are on the one hand the global oversupply of sugar and the expected strong production increase to make the international sugar price low; on the other hand, the production cost of China's sugar enterprises is higher, and at the same time, China adopts a policy of purchasing and storing sugar to protect the price, but The reserve price is as high as 6,100 yuan/ton, which makes sugar prices continue to operate at a high level. As a result, excess sugar in the world has flooded into the Chinese market.

“The original intention of the sugar collection and storage policy is good, but it also aggravates the huge differences in domestic and foreign sugar prices. The operation is not limited to the types of companies that pay for storage, resulting in imported sugar flowing into the reserve, which is equivalent to 'global excess, China’s payment', for industrial protection. It was counterproductive," commented the industry expert who declined to be named.

Adversity expansion wins the pricing <br> <br> continuous influx of domestic sugar imports, the price of sugar plummeted, domestic sugar prices caused the most immediate business impact. At the same time, the raw sugar processing capacity in the sales area has soared, and the price linkage has increased. This has indirectly led to the weakening of the pricing power of major producing regions such as Guangxi and Yunnan, and has been competing for the right to speak in the ring.

Since 2011, raw sugar processing capacity in various regions of China has experienced an expansion cycle. According to statistics from the Sugar Industry Association, China's raw sugar processing capacity has been expanded from 3 million tons in 2010 to nearly 7 million tons, and new raw sugar processing companies are planning.

Raw sugar processing companies, especially coastal raw sugar trading and processing enterprises, are important channels for international sugar to enter the domestic market. Processing plants are mainly distributed in Shandong, Guangdong, Liaoning, Fujian, and Jiangsu. Since 2010/2011, most of the imported sugar refineries within the quotas have achieved a very good profit status. With the additional imported raw sugar refining companies, most of them will also make profits during the seasonal peaks of international sugar prices from April to July each year. At the window, the coastal raw sugar processing capacity gradually increased from the current 200,000 tons/month to the current 400,000 to 500,000 tons/month, and the impact of international sugar prices on the domestic market also expanded, and the correlation between the two markets began to increase.

In addition, sugar industry analyst Zhang Xiaojin pointed out that the expansion of raw sugar processing capacity is bound to cause enterprises to actively compete for raw sugar sources, or further stimulate imports, is not conducive to the development of China's sugar market.

This phenomenon has attracted the attention of industry experts. In order to curb the blind development of raw sugar processing capacity, avoid serious overcapacity, and protect the domestic sugar industry, the China Sugar Association "issued a notice on preventing the blind expansion of raw sugar processing capacity" to strictly control raw sugar processing capacity.

"This measure will prevent the blind expansion of raw sugar processing capacity, avoid the vicious competition that may be caused by excess sugar production capacity, maintain the domestic sugar market order, and protect the domestic sugar industry from international dumplings. There is a certain significance, but it is difficult to solve the fundamental problems.” Huang Guiheng believes that, in essence, the discourse power of production areas is adjacent to the problem of the lack of domestic sugar and the competitiveness of the international market. The high cost of domestic sugar has directly raised the cost. The cost of sugar production is a major factor in the lack of competitiveness of domestic sugar.

Backed by futures options "International sugar competition is a tough battle. Sugar supply is the lifeline for the development of the sugar industry. The sugar industry is home to a home market with huge growth potential. Future competition will be in the supply of sugar. The source started." Huang Guiheng pointed out that in the future China's sugar industry, whoever has mastered the supply of high-efficiency sugar, whoever will be able to hold a very competitive quality resource in the sugar industry, the development of the sugar base will be the future of China. Sugar giants are competing in important directions.

In addition, under the current background of a downturn in the sugar market, futures have also become a major factor in reducing risk for sugar companies. It is understood that the domestic large-scale sugar companies, sugar companies have participated in different degrees of futures hedging business, especially sugar mills, because the volatility of sugar prices have a greater impact on corporate profits, participate in futures hedging, cross-market arbitrage enthusiasm is also higher.

“Now we have reached the point where the sugar futures are 'inseparable'.” Yong Yongan, executive vice president of Guangxi Dong Sugar Group, stated at a meeting of the Zhengzhou Chamber of Commerce that in terms of using the futures market, they are not limited to traditional sets. Hedging business.

Since the Zhengzhou Stock Exchange sugar futures was listed, the market as a whole has been operating stably. The market investors have a reasonable structure and transactions are active. It has become one of the important sugar futures markets in the world. At present, the position of white sugar futures is stable at about 1 million hands on a bilateral basis, and the transaction volume is active. In the international ranking of the volume of FIA commodity futures, the trading volume is often at the forefront. In 2012, the cumulative turnover of white sugar futures contracts was 148.27 million, with a turnover of 8.4087 trillion yuan.

"Overall, sugar futures prices are highly correlated with the spot price trend. Sugar spot companies actively participate in and use sugar futures for hedging in order to stabilize production, better promote the healthy development of China's sugar industry, and futures markets to serve the market for the real economy. Function has been better played and embodied." Analysts said.

In addition to futures, sugar companies also have more expectations for sugar options. At present, the international mature markets all have options trading mechanisms, and emerging markets such as the BRIC countries have also launched on-market options products.

“There are few individual futures contracts in the international market. Generally, there are corresponding options. Once the sugar options are listed, futures position holders will increase arbitrage opportunities and royalty income, and the market maturity and liquidity will increase significantly. "Zhang Xiaojin said.

According to the relevant person in charge of Zhengshang, over the years, Zhengshang continued to study the development of the international options market, studied in depth the design of options trading systems, actively carried out the construction of options trading systems, and made substantial progress in the promotion of options. After in-depth discussions in various aspects such as exchanges, members, and market experts, the exchanges have continuously improved the design of options trading system. At present, more comprehensive and systematic options trading rules have been formed. On this basis, the exchange's existing options on futures trading systems add options trading functions to complete the all-round upgrade of options. At present, Zhengzhou Securities is preparing to hold an option simulation transaction to further examine the rules, test and improve the options function of the system's transaction end and the member's end. Participants will expand from practitioners to investors and effectively promote the development of the option market.