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Chinese sugar importers eye more washouts on Beijing's import controls

ZHENGZHOU, China - Chinese refineries could cancel more sugar cargoes in coming months if Beijing signals stricter control on imports through a recently introduced licensing system, said trade sources.

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ZHENGZHOU, China - Chinese refineries could cancel more sugar cargoes in coming months if Beijing signals stricter control on imports through a recently introduced licensing system, said trade sources.

Chinese buyers cancelled up to six cargoes of raw sugar last month, according to traders, as rising prices offered an opportunity to make profits on earlier contracts.

While global prices tumbled off an eight-month high on Friday, sources said there could be further cancellations, also known as washouts, as some refineries worry about obtaining sufficient import permits next year to cover recent purchases.

"We've heard from refineries they're going to do that," said one trader who declined to be identified.

The bonded zones are almost full and it costs too much to store sugar there, he added.

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China has required sugar importers to register out-of-quota imports of the sweetener since last November, as it seeks to control a flow of cheap imports that local mills say has hurt their business.

"It all depends on policies," added another senior trade source, who said cancellations so far were "not a big number" of overall imports.

"There's enough storage at ports so the question is, will the government allow for more bonded space," he said.

Chinese imports are up 55 percent in the first nine months of the year on the year to 3.79 million tons.

Chinese refineries could make profits of around 1,000 yuan ($157.44) per ton on imports in recent months but with Beijing restricting imports through the licensing system, most arrivals in the last quarter will be forced to enter bonded warehouses, as buyers wait for a new batch of permits to be issued in 2016, Liu Hande, deputy secretary general of the China SugarAssociation, told a conference on Saturday.

Policymakers have not yet reached a conclusion on how many permits to offer, with discussions ongoing between industry and government.

However, the situation is likely to remain "basically stable with this year's level", said Liu, who has participated in the initial discussions.

Liu estimated imports in 2015/16 could be slightly lower on last year's level, at 4.5 million tons.

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Further insight into next year's policy could be revealed at next month's annual association conference in Guilin.

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