The government has effectively cleared the way to quadruple its raw sugar import tariff in June, giving extra incentive to bring up to 1.2 million metric tons flooding into port when the duty sinks to an unusually low $50 a metric ton in May.
The Commission of the Customs Union of Russia, Belarus and Kazakhstan agreed Friday to peg the duty to New York prices in the preceding month, rather than the preceding three months, in a move that a trade union says could raise the June duty to $200.
The decision takes effect immediately and means that suppliers to the world's No. 3 raw sugar buyer have until the end of May to take advantage of next month's exceptionally low tariff of $50 per metric ton, down from $140 at present.
Analysts and traders said monthly raw sugar import volumes in May could approach or even surpass an eight-year record.
"The raw sugar volumes imported in May will be enough to supply the market until the start of beet sugar production at the beginning of August," said Andrei Bodin, chairman of the Russian Sugar Producers' Union.
Sugar prices slid almost 40 percent in the first quarter of this year, as the market focused on a lack of physical demand after surging to a 29-year peak of 30.40 cents a pound on Feb. 1. Prices fell by almost half in the following weeks, before the relief rally kicked in.
Russian demand has contributed to a rebound in prices from an 11-month low, meaning that a comparison to April prices will result in a higher duty.
"The June tariff will be significantly higher than in the previous month — about $200," said Dmitry Rylko, general director of the Moscow-based Institute for Agricultural Market Studies.
Rylko said more than 200,000 metric tons of sugar delivered in March and April was still waiting in warehouses to be cleared by customs. This could add to the roughly 1 million metric tons that IKAR expects to arrive at Russian ports in May.
The Customs Union, formed on Jan. 1, 2010, agreed to apply an import tariff in the range of $140 to $270 per metric ton from Jan. 1 to April 30 and again from Aug. 1 to Dec. 31. Uncertainty has surrounded the tariff rates from May to July.
According to the new policy, the June tariff will be set by May 15 based on the average New York sugar price for April. Under the previous scheme, it would have been set based on the average price for February, March and April.
The previous method led some analysts to forecast a June tariff of about $85 a metric ton, still well below the $140 a metric ton level for April.
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