Restrictions on sugar exports from Ukraine to EU might force some factories to close - Ukrainian sugar association

MOSCOW. Feb 7 (Interfax) - Restrictions on sugar exports from Ukraine to the European Union would have a negative effect on the Ukrainian sugar industry as a whole and might force a number of sugar factories to close, Ukrainian media quoted Nazar Mikhailovin, acting board chairman of the Ukrainian National Association of Sugar Producers, as saying in comments.

"This would have a very destructive effect on domestic sugar producers, because our industry is export-oriented. We hoped that we would be able to export sugar, thus preserving and developing our industry. Restrictions, licensing, and bans would lead to overproduction in this season and closures of factories," Mikhailovin said.

Ukrainian sugar factories produced 1.8 million tonnes of sugar in 2023-2024, with the country's domestic demand of 900,000 tonnes, meaning that Ukraine could export 900,000 tonnes of sugar, he said.

"As a matter of fact, the key buyers of Ukrainian sugar in the EU were food industry businesses, which process sugar and use it directly in their production processes. They are interested precisely in Ukrainian sugar, because it is of high quality, meets EU standards, and is somewhat cheaper than in most of the EU countries," Mikhailovin said.

If the EU imposes quotas and other restrictions, Ukrainian sugar producers would have to think about exploring other markets, in particular in Asia, Africa, and other countries outside of the EU, which would require access to sea shipments, he said.

Ukraine in fact exports sugar to some Asian and African countries, such as Cameroon, he said.

"This is more about the cost of logistics. The blockade of Polish and Hungarian border crossings have increased our logistical costs nearly 2.5 times. After all, you have to take into account the delivery of sugar to some closest port and then sea shipment itself to bring it to those countries," Mikhailovin said.

Commenting on Poland's proposal that 2021-2023 data be used in calculating a quota for Ukrainian sugar exports to the EU, Mikhailovin said that this would have quite a significant effect on possible amounts of shipments. In particular, before the agreement on duty-free sugar exports with the EU came into effect on June 5, 2022, Ukraine was permitted to ship no more than 20,000 tonnes of sugar a year to the EU. Moreover, Ukraine had exported virtually no sugar between February and June 2022, he said.

Ukraine exported only about 150,000 tonnes of sugar in 2022, compared to 550,000 tonnes in 2023, he said.

"Certainly it would be better for us to export without any quotas. However, if you choose between proposals from European associations of sugar producers and the quota proposed by the European Commission, the figure announced by the Commission is more acceptable to us," Mikhahilova said.

On January 31, the European Commission proposed the extension of autonomous trade measures suspending import duties and quotas on Ukrainian products for another year, i.e. from June 6, 2024 to June 5, 2025. The measures were introduced initially in June 2022.

At the same time, the five EU member states bordering Ukraine are entitled to impose local restrictions on imports of Ukrainian agrifood as long as such imports cause market distortions in an individual member state or an EU region. The Polish Agriculture Ministry proposed that, in calculating quotas for imports of poultry meat, eggs, and sugar from Ukraine, the EU refer not to 2022-2023 data but to average figures for 2021-2023.