The Vietnam Sugar Association has asked the trade ministry to postpone sugar imports so that local producers can liquidate their stocks. The move will also prevent sugar prices from falling further.
In February, the Ministry of Industry and Trade gave licenses to 24 enterprises, allowing them to import 250,000 tons of raw and refined sugar this year, down from 300,000 tons of imported sugar allowed in 2010.
So far, businesses have imported around 30 percent of the quota this year.
Nguyen Thanh Long, chairman of the Vietnam Sugar Association, said, "The ministry sets sugar import quotas each year after assessing local production and demand, usually sometime in August, but this year's quota was announced early."
Long said the demand for sugar usually skyrockets in the last quarter of the year, which sends sugar prices soaring and adversely affects importers.
"However, February is too soon for imports. As of late March, Vietnam still had 400,000 tons of sugar in stock, or nearly half of the 860,000 tons produced in the first three months of the year," he said.
Local sugar plants say sugar illegally imported from Thailand had contributed to dragging prices down.
Hoang Nham Nam, head of planning and marketing at the Bien Hoa Sugar Company, said sugar is currently retailed at between VND21,000 (US$1) and VND23,000 ($1.1) per kilogram, VND1,200-2,000 cheaper than at the beginning of March.
The price is expected to nose-dive if more sugar is imported into the country before local stocks exhaust.
Nguyen Loc An, deputy head of the Dosmetic Market Department under the Ministry of Industry and Trade, blamed the superfluous import quota on inaccurate estimates from the agricultural ministry.
"At the end of last year, the Ministry of Agriculture and Rural Development expected local sugar plants to produce only 900,000 tons in 2011. Based on this projection, the Ministry of Industry and Trade set an import quota in a bid to stabilize the market," said An. "But now, [the agricultural ministry] says sugar production will amount to 1,095,000 tons, or 195,000 tons more than the original estimate."
An did not say whether the trade ministry would delay sugar imports or not.
Nam said that sugar prices have been heading south globally the sweetener is being traded at around $700 per ton in international markets, $100 cheaper than in early March.
The director of a sugar mill in Mekong Delta, on condition of anonymity, said falling prices are putting a financial strain on local plants because input and transport costs have increased.
In fact, several sugar mills in the Delta struggling to liquidate their growing stockpiles have been forced to suspend operations.
According to the Vietnam Sugar Association, some plants have more than 50,000 tons in stock despite introducing drastic price cuts. One mill could sell only 1,000 tons during the first quarter and still has 29,000 tons in storage.
The government's decision to import sugar is an effort to curb speculation and stabilize prices. Experts say it's an unnecessary move because there is a sugar surplus in the country and local prices are at par with global prices at the moment.