INTERVIEW-Indonesia sugar refining capacity to rise by a third

JAKARTA Tue Nov 20, 2012 5:05am EST

JAKARTA Nov 20 (Reuters) - Indonesia's sugar refining capacity will jump by a third to 4.2 million tonnes next year as three more refineries begin production to try and meet rising demand from the food and beverage industries, an industry group said on Tuesday.

There are now eight sugar refineries in Indonesia, which is set to be crowned the world's top importer of raw sugar in the year to September 2013, with existing capacity of 3.2 million tonnes, Suryo Alam, chairman of the Indonesian Sugar Refineries Association, told Reuters.

"Demand for processed food is increasing," said Alam, who also works at Singapore-listed palm trader Wilmar's Refined Sugars Group Indonesia unit, which runs two Indonesian sugar refineries.

Sugar refineries are now running at 70 percent capacity but this figure will slip to 65 percent next year as the new refineries pick up pace, he added.

Sugar consumption in Indonesia, the world's fourth most populous country, with around 240 million people, is seen growing around 4 to 5 percent annually and stands at about 5 million to 5.5 million tonnes now.

Helping boost this demand is industrial use of the sweetener, with raw sugar consumption by Indonesia's food and beverage industries set to climb by 9 percent this year.

Imports of raw sugar will reach 2.53 million tonnes this year, versus imports of 2.425 million in 2011.

Volumes covered by import permits in 2013 will rise to 2.7 million tonnes from 2.5 million this year, said Alam.

Indonesia limits imports of raw sugar, with Thailand and Brazil accounting for about 85 percent of supplies, to protect local farmers and aid domestic sugarcane mills.

The archipelago was the world's second-largest sugar exporter in the 1930s. But ageing sugar mills, a vast network of smallholders and an influx of cheaper imported sugar put pressure on local production.

Domestic production will be 2.45 million tonnes this year, up from 2.192 million tonnes in 2011, industry estimates show.

The island of Java supplies 60 percent of sugar output in Indonesia, where sugarcane farmers protested in December against plans to import sugar this year.

But late in September the country abandoned a target of becoming self-sufficient in the production of white sugar by 2014, after a struggle to boost output in the face of red tape over land licenses, competition for land and under-investment. (Reporting by Michael Taylor and Yayat Supriatna; Editing by Clarence Fernandez)