(Adds trader’s comments in the fifth paragraph.)
Sept. 30 (Bloomberg) -- China has ordered two companies to sell their inventories of sugar after they were found to be too high and warned that those found hoarding will be punished.
Yangpu Nanhua Sugar Group and Guangxi Fengshan Biochemical Co. have been found with inventories much higher than the national average and have been instructed to sell 170,000 metric tons of the white sweetner at no more than 7,000 yuan a ton before Oct. 15, according to a statement on the National Development and Reform Commission’s website today.
A call to the Nanning-based Nanpu Yanghua’s administrative office was answered by someone who delined to be identified or comment. A call to Guangxi Fengshan was not answered.
Increased domestic supply in China may damp a rally in raw sugar in New York, which has climbed 27 percent from this year’s low in May on concern that production in Brazil, which accounts for about half of the global exports, will decline more than forecast and on tightening supply in China. The Chinese government has sold sugar and corn this year to damp surging inflation.
“The government forcing these producers to sell is a surprise to the market,” said Wang Chen, former head of research at Wanda Futures Co. and now trader at Ningbo Dunghe Investment Co. “It will definitely increase the short-term supply in China.” Sugar for spot delivery was quoted at 7,360 yuan a ton in Guangxi before the statement, Wang said.
The government will establish a database on sales by large companies and their costs, the NDRC said. The government will warn any company suspected of hoarding and those who refuse to correct their actions will be punished, the statement said, without elaborating.
Raw sugar for March delivery yesterday rose 1.57 cents, or 6.5 percent, to settle at 25.87 cents a pound on ICE Futures U.S. in New York, the biggest gain since July 7.
Policy makers including Premier Wen Jiabao reiterated this month that stabilizing prices remains their top priority even as inflation eased to 6.2 percent in August from a three-year high in July. Increases in consumer prices have exceeded the government’s 2011 target of about 4 percent every month.
--Feiwen Rong. Editors: Richard Dobson, Ovais Subhani
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