CHINA will hold an auction of its first sale of state sugar reserves since 2016 next week amid tightening supply and rocketing prices of the sweetener.

The state reserve’s management body in a notice on Friday (Sep 22) said it would auction 126,700 metric tons of sugar on Sep 27 to ensure the stability of domestic sugar supply and prices.

The auction will include 26,700 tons of old crop white sugar with a floor price of 6,500 yuan (S$1,216.67) per ton and 100,000 tons of white sugar produced in 2023 with a floor price of 7,300 yuan (S$1,367.51) per ton, Huashang Reserve Commodity Management Center said.

Global sugar prices have surged to a 12-year high, reducing Chinese imports while domestic output has also declined.

The auction volume is less than analysts’ expectations of 300,000-500,000 metric tons, although it is unclear whether China will hold more auctions.

“It’s bullish news, definitely,” said a China-based sugar trader with a global trading house, adding that the market had expected a floor price of about 7,000 yuan.

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“It’s very high... They don’t want the market to collapse,” he added.

A Dalian-based sugar analyst said the floor price was comparable to spot sugar prices, with sugar in top growing region Guangxi trading at over 7,400 yuan per metric ton.

The state might sell more small batches in several auctions, the analyst said.

China relies on sugar imports, predominantly from Brazil, to meet demand of about 15 million tonnes a year.

But arrivals during January-August 2023 plunged 42.3 per cent from a year ago to 1.57 million metric tons, according to General Administration of Customs data.

“I believe China will need to import the auction volume to replenish its reserve. The timing will be a question,” said Green Pool analyst Grace Zhang Johnson. REUTERS