15/06/2004 - 22:00

Sugar miller keen to grow

15/06/2004 - 22:00

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Sugar miller keen to grow

Sugar miller keen to grow

 

South Korean sugar producer Cheil Jedang is willing to invest $75 million expanding its operations in the Ord River project but, like others in the area, it is hamstrung by the lack of new land.

Cheil Jedang rescued the Ord’s fledgling sugar industry four years ago when it paid “less than $20 million” for CSR’s sugar mill.

The Koreans – like CSR – always saw the existing sugar industry as simply the start of a much bigger enterprise.

Cheil Jedang would like to more than double the amount of sugar cane processed at its mill but that can’t happen until farmers get access to more land.

CJ’s growth plans include possible construction of a $45 million co-generation power station to supply the Argyle diamond mine, should Argyle decide to proceed with its underground expansion (see adjoining article).

The best-case scenario for CJ is greatly expanded sugar cane production, a larger and more efficient mill and a co-generation plant providing extra income.

An alternative scenario has the mill struggling along with current production volumes and possibly closing.

CJ Ord Sugar logistics manager Wayne Paul says the situation is “delicately poised”.

The low world sugar price (US7.25 cents per pound) and the high Australian dollar (US70 cents) are a big part of the problem.

“Unless the price of sugar goes up to eight or nine cents and the dollar comes back to 55 or 60 cents, we would probably struggle,” Mr Paul said.

Sugar cane was first planted in 1994 and is now the Ord’s major crop, worth about $17 million a year.

Importantly, it anchors agricultural activity in the Ord, providing a base for farmers who also grow horticultural produce to boost their income.

If the sugar industry shut down, other agricultural activities would also be threatened.

Just more than 4,000 hectares – one third of the stage 1 area – is used to produce 450,000 tonnes of sugar cane.

Mr Paul said the company would prefer to process 1.2 million tonnes of cane each year.

This would make it commercially viable for the company to upgrade the mill to improve its operating efficiency

It would also suit CJ’s strategic supply objectives.

Specifically, CJ’s food factories in Indonesia would be able to obtain all of their sugar supplies from the Ord.

The brief three-day sailing to Indonesia, via the port of Wyndham, adds to the strategic appeal of Ord sugar.

Growers in the Ord have long had their eyes on Green Swamp, a 1380-hectare area adjacent to stage 1, as the most likely location for new sugar farms.

Any additional expansion of sugar would only occur if the stage 2 area further north was opened up for irrigation.

A Wesfarmers Marubeni consortium spent four years and nearly $4 million investigating the feasibility of establishing an expanded sugar industry and a new mill in stage 2.

The consortium scrapped the $500 million project in 2001, citing concern about low world sugar prices, water supplies and land access.

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