Required Report - public distribution

**Date:** 4/9/2004

**GAIN Report Number:** KS4018

KS4018

**Korea, Republic of**

**Sugar**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Marcus E. Lower

U.S. Embassy

**Prepared by:**

Stanley S. Phillips / Sunyoung Choi

**Report Highlights:**

Raw sugar imports are expected to increase marginally in MY 2004/05 in
response to improving demand from the soft drink sector and continued
strength in refined sugar export demand from China. Increasing
international corn prices could reduce the competition Korean sugar
refiners face from high fructose corn syrup manufacturers in MY 2004/05.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Seoul \[KS1\]

\[KS\]

Table of Contents

[Section I. Situation and Outlook 3](#section-i.-situation-and-outlook)

[Section II. Statistical Tables 5](#section-ii.-statistical-tables)

[Sugar PSD 5](#sugar-psd)

[Trade Matrix 6](#trade-matrix)

[KOREA: Raw Sugar Imports (Raw value)
6](#korea-raw-sugar-imports-raw-value)

[KOREA: Refined Sugar Exports (Raw value)
6](#korea-refined-sugar-exports-raw-value)

[Korea: Refined Sugar Production 7](#korea-refined-sugar-production)

[Korea: HFCS Production by Corn Wet Millers
7](#korea-hfcs-production-by-corn-wet-millers)

[Korea: Refined Sugar Retail Price 7](#korea-refined-sugar-retail-price)

[Korea: Import Price of Raw Sugar 8](#korea-import-price-of-raw-sugar)

[Korea: Export Price of Refined Sugar
8](#korea-export-price-of-refined-sugar)

# Section I. Situation and Outlook

Sugar cane and sugar beet are not produced in Korea. However, Korea
produces about 1.25 -- 1.28 million metric tons (MMT) of refined sugar
annually from imported raw cane sugar. Korea's raw sugar imports are led
by three major refiners; CJ, Samyang and TS. The three leading importers
accounted for over 90 percent of annual raw sugar imports. The remaining
10 percent is imported by the feed sector for lysine production.
According to the Korea Sugar Association (KSA), Korea consumed about 74
percent of refined sugar domestically and exported the remainder in
calendar year (CY) 2003.

Refined Sugar Consumption

Korea's refined sugar consumption is forecast to increase from 1.26 MMT
in marketing year (MY) 2003/04 (September --August) to 1.27 MMT in MY
2004/05. The soft drink industry, a major demand factor for refined
sugar in Korea, experienced a 3 percent sales decrease in CY 2003
reflecting dampened sugar consumption caused by the slow economy and
cool summer weather. However, increased refined sugar exports to China
and demand from the lysine production sector offset the decreased
refined sugar consumption in domestic soft drink section in CY 2003.
Korean soft drink consumption is expected to increase 3 -- 4 percent in
CY 2004 along with an expected economic recovery in the second half of
CY 2004.

Trade

In MY 2004, Korea's raw sugar imports are expected to continue an upward
trend amounting to 1.61 MMT. Increased imports will be driven by high
demand for Korean refined sugar in China and a rebound in the domestic
soft drink industry. Korea imported 849,820 MT of raw sugar from
Australia in MY 2002/03; a 35 percent increase from MY 2001/02. Imports
from Australia accounted for 53 percent of Korea's total raw sugar
imports in MY 2002/03. Australian and South African raw sugar imports,
along with lower quality imports from Guatemala and Brazil, will likely
remain the primary sources of supply for Korean refiners. Raw sugar
imports from Guatemala and Brazil decreased from 554,802 MT in MY 2002
to 392,420 MT in MY 2003.

Raw sugar imported by the Korean feed industry increased to 150,000 MT
in CY 2003 from 140,000 in CY 2002 to meet demand for lysine exports to
South-East Asian countries.

Korean refined sugar exports increased by 4 percent to 325,927 metric
tons (MT) in MY 2002/03 from 314,297 MT in MY 2001/02. The primary
export market for Korean refined sugar is China. Exports to China jumped
34 percent to 100,185 MT in MY 2003 from 74,819 MT in MY 2002. Increased
exports to China offset reduced exports to Hong Kong and the
Philippines. Hong Kong and China covered 68 percent of the Korean
refined sugar exports in MY 2003. The Korean sugar industry expects
China to increase demand for Korean refined sugar steadily as more
Chinese diets shift to more processed foods and beverages in response to
improved living standards.

Stock

According to local refiners, 27 -- 30 days of raw sugar stocks,
amounting to about 110,000 MT, are usually on hand for the production of
refined sugar. The domestic retail price of refined sugar is 666 Korean
Won (KRW) / kilogram (Kg) (US\$ 0.58 / Kg). Retail sugar prices have
been steady since July 2002. Increased international future prices for
raw sugar and increased freight costs will likely cause the Korean
refined sugar industry to raise retail prices in the second half of CY
2004.

HFCS

HFCS, a key substitute for refined sugar is priced competitively against
refined sugar in Korea. According to the local HFCS industry, HFCS is
available at 450 - 460 KRW / Kg (US\$ 0.39 -- 0.4 / Kg) in Korea. The
soft drink industry consumes more than 80 percent of total HFCS
production with the remainder going into confectionary and
pharmaceutical products. Within the Korean soft drink industry,
carbonated soft drinks accounted for the main consumption of HFCS.
Carbonated soft drink consumption decrease 7 percent in CY 2003 due to
cool summer weather and reduced domestic consumption stemming from the
slow economy. Similarly, HFCS production decreased as well. The HFCS
industry is expected to increase production in MY 2003/ 04 along with
the anticipated rebound of domestic consumption driven by a
strengthening local economy.

# Section II. Statistical Tables

## Sugar PSD

![](media/image2.wmf)

## Trade Matrix

### KOREA: Raw Sugar Imports (Raw value)

  -------------- -------------- -------------- -------------- --------------
  Country        MY 2003 (Sept                 MY 2004 1/     
                 -- Aug)                                      

                 MT             US\$ 000       MT             US\$ 000

  Australia      849,820        153,874        454,173        81,600

  Guatemala      363,550        64,260         34,155         5,657

  Thailand       166,719        27,956         94,037         15,927

  South Africa   162,094        27,600         97,510         17,480

  Brazil         28,940         3,411          2              1

  Mozambique     18,544         4,870          0              0

  U.S.A.         23             14             0              0

  India          0              0              108            24

  Columbia       0              0              3              3

  U.K.           1              0              0              0

  Other          3              21             0              8

  Total          1,589,694      282,006        679,988        120,700
  -------------- -------------- -------------- -------------- --------------

1/ September 2003 -- January 2004 data.

Source: Korea Trade Information Services

### KOREA: Refined Sugar Exports (Raw value)

  -------------- -------------- -------------- -------------- --------------
  Country        MY 2003 (Sept                 MY 2004 1/     
                 -- Aug)                                      

                 MT             US\$ 000       MT             US\$ 000

  Hong Kong      123,016        27,085         57,917         12,231

  P. R. China    100,185        23,621         51,286         11,263

  Singapore      33,536         6,941          14,587         2,851

  Philippines    27,612         6,428          12,360         2,754

  Indonesia      24,044         5,461          10,523         2,397

  Japan          1,757          503            598            157

  Micronesia     1,165          479            452            182

  Guam           899            328            382            135

  Other          13,713         3,204          298            115

  Total          325,927        74,050         148,403        32,085
  -------------- -------------- -------------- -------------- --------------

1/ September 2003 -- January 2004 data.

Source: Korea Trade Information Services

### Korea: Refined Sugar Production 

(Unit: 1,000 MT)

  ------------ --------- ---------- ---------- ---------- ---------- ---------
  Calendar     1998      1999       2000       2001       2002       2003
  Year                                                               

  Volume       1,127     1,176      1,253      1,255      1,277      1,283

  Change       -6%       4%         7%         0%         2%         0.5%
  ------------ --------- ---------- ---------- ---------- ---------- ---------

Source: Korea Sugar Association (KSA)

### Korea: HFCS Production by Corn Wet Millers 

(Sept -- Aug; Unit: 1000 MT)

  ----------------------- ----------------------- -----------------------
  Marketing Year          Production              Raw Sugar Equivalent

  1993/94                 298                     244

  1994/95                 307                     252

  1995/96                 309                     253

  1996/97                 349                     286

  1997/98                 321                     263

  1998/99                 329                     270

  1999/00                 385                     316

  2000/01                 427                     350

  2001/02                 480                     394

  2002/03                 432                     354
  ----------------------- ----------------------- -----------------------

Source: KOCPIA (Korea Corn Processing Industry Association)

### Korea: Refined Sugar Retail Price 

  -------------- ----------- ----------- ----------- ----------- -----------
  Date           Nov. 2000   May 2001    March 2002  July 2002   March 2004

  Price (US\$ /  0.596       0.559       0.534       0.561       0.570
  Kg)                                                            

  Price (KRW/Kg) 686.62      726.44      704.65      666.00      666.00

  Change         5.0%        5.8%        -3.0%       -5.5%       0%

  Exchange rate  1151.15     1298.46     1318.72     1185.12     1166.96
  (KRW / US\$)                                                   
  -------------- ----------- ----------- ----------- ----------- -----------

Note: retail sugar price is based on 15 kg package.

Sources: Industry Data & Bank of Korea monthly average exchange rate

### Korea: Import Price of Raw Sugar

H.S. Code 1701.11 (US\$/MT, CIF 1/)

  -------- ----- ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- -----
  Year 2/  Jan   Feb    Mar    Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec

  2001     245   256    236    242   241   236   233   229   225   224   219   213

  2002     211   210    200    197   190   189   184   168   169   177   171   175

  2003     185   176    181    188   205   193   192   189   189   181   181   185

  2004     181   -16%   -10%   -5%   8%    2%    4%    12%   12%   2%    6%    6%

  Change   -2%                                                                 
  -------- ----- ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- -----

1/: Cost, Insurance and Freight

2/: Calendar year.

Source: Korea Trade Information Services

### Korea: Export Price of Refined Sugar 

H.S. Code 1701.99 (US\$/MT, FOB 1/)

  -------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
  Year 2/  Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec

  2001     281   293   288   284   285   285   280   282   280   275   268   267

  2002     269   264   257   254   245   249   245   243   244   242   240   237

  2003     243   247   253   248   247   244   239   238   236   229   228   234

  2004     231   -6%   -2%   -2%   -1%   -2%   -2%   -2%   -3%   -5%   -5%   -1%

  Change   -5%                                                               
  -------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

1/: Free on Board

2/: Calendar year.

Source: Korea Trade Information Services