CXL suppliers include highly competitive suppliers such as Brazil and Australia. Such a reform would give refiners greater access to raw sugar and increase competition in the market. In this context, the TLS presentation highlighted the growing corporate concentration in the EU sugar sector (with the top 7 producers accounting for 81% of the EU sugar market).
Corporate concentration in the EU sugar market: Percentage of EU27 sugar production from beet and cane
|Sdzucker||British Sugar||Nordzucker||Tereos||Cristalco||Pfeifer & Langen||Royal Cosun|
Source: Tate & Lyle Sugars, EU sugar after 2015: Consequences of the new regulations (see below)
The presentation noted that the current partial nature of the reforms introduced means that EU refiners will still be restricted to imports from nations that have preferential agreements, with the duties levied on sugar sourced from non-preferential suppliers undermining the competitiveness of traditional sugar cane refiners. According to a TLS representative at the seminar, what tends to happen is that the ACP countries price up the world market level plus 98 a ton as they know thats what the floor price is for imports.
At the pricing levels that EU import duties give rise to, the TLS representative commented that the survival of TLS is extremely, extremely precarious. This is promoting a situation where Tate & Lyle is operating at 65% of its 1.4 million to 1.5 million tons capacity at its factories in London and Lisbon. TLS representatives argue that EU sugar prices, which fell 6.8% since reaching a record in January, to 688/ton in September, will continue to tumble after quotas end, as beet producers release supplies and compete for market share. The lower market prices that are likely to result will make it harder for refiners to import from preferential nations, as the cost of production in many is at about 30 cents a pound.
The TLS presentation acknowledged that these further policy reforms will be unpopular with those who currently benefit, but argued that the wider benefits in terms of levelling the playing field between European sugar manufacturers, ensuring continued competition on the EU market, reducing inflationary pressures and ensuring consumer choice far outweigh costs.