Dear Editor,
I read with interest in your December 10 publication that the local construction company, GAICO and United States distributor Sucro Ltd have together in joint venture (JV) will develop a sugar refinery at the former Wales Sugar Estate location, and which is set to be completed next year.[1] This JV will lead to the creation of the Demerara Sugar Refinery Ltd (DSR).
As reported, the DSR’s production capacity will be 100,000 tonnes of refined sugar annually that aims to meet the Caribbean’s annual demand of 80-100,000 tonnes. According to GAICO’s head Komal Singh, the DSR will be “transformational for Guyana in a major way, because GuySuCo no longer need to look at the international market.” He posited that “We (DSR) can take off all the raw sugar”, which will then “transform GuySuCo into a viable industry”. Further, asked where the company (DSR) will get its sugar to refine, Singh was pellucid that they are “confident that GuySuCo will be able to meet the demand by the time of the completion of the refinery, as it (GuySuCo) is currently going through restructuring”. GuySuCo’s CEO Paul Cheong echoed Singh’s position that he too is confident that GuySuCo will meet the demand of the company (DSR).
Editor, let us stop here, and analyze GuySuCo meeting DSR’s demand, and let us hope that GuySuCo with Cheong’s commitment that “he and his staff are working hard to get GuySuCo back on track and we are getting there” that next year, and onwards, sugar production will soar to 100,000 tonnes and more per year. From all reports, this year is heading for another dismal performance of nowhere near to 100,000 tonnes.
The present world market price for raw sugar is about US$308 per tonne. GuySuCo’s present cost of production (maybe at minimum US$1.00 per pound or US$2,200 per tonne), which is 7 times higher than the current world market price. The best available markets are local sales, CARICOM, North American and other international markets for packaged and dried bagged sugar to which GuySuCo has been targeting within recent years at an average price of not more than US$720 per tonne, and which is still 3 times lower than the cost of production. It was for these markets that GuySuCo decided to install the Enmore packaging plant at Albion to boost packaged sugar. The other secured market is USA, which gleaned from GuySuCo’s annual reports, is about 12,000 tonnes of raw sugar per year at about US$700 per tonne.
Editor, considering these markets that GuySuCo has been targeting, can Cheong say at what price GuySuCo will be selling its sugar to DSR, and what quantity, or will GuySuCo cease all packaging and bagging and sell all its sugar to DSR as raw sugar, and at what price? At what price is Singh contemplating paying for GuySuCo’s raw sugar that will transform the corporation to a state of viability? If however, GuySuCo will retain these present markets and local sales, then it will be impossible to meet DSR’s annual demand of 100,000 tonnes per year, and if this is the case then DSR will have to source its raw sugar outside of Guyana, and which will be a matter for DSR.
The news article has stated that this JV mirrors a JV that the Caribbean Sugar Refinery (CSR) has with the Government of Belize.[2] There is no mention that the current cost of production at the Belize Sugar Industry (BSI) is US$0.20 to 0.22 per pound (Google the cost of production for Belize sugar) or US$440 per tonne (almost 5½ times lower than GuySuCo), which makes it viable for CSR’s refinery. From the same research, BSI is trying to bring its cost of production down to 15 US cents per pound; further enhancement of CSR’s viability. Editor, there cannot be secrecy in this arrangement, because whatever decision GuySuCo makes in supplying raw sugar, by price and quantity, to DSR will have an effect on the future financial state of the company, and a consequent effect on taxpayers’ funded subsidy to it.