(This 13th October story has been refiled to add dropped word to paragraph 1)

FILE PHOTO: White sugar products are placed for sale at a supermarket in Beijing, China September 4, 2017. REUTERS/Jason Lee/File Photo

LONDON/BEIJING (Reuters) - A crackdown on sugar smuggling into China has left abundantly supplied markets in Asia and beyond struggling to absorb excess supplies, causing a wider storage problem for global markets.

Vast tonnages of sugar smuggled into China are believed to be produced mostly in India or Thailand and shipped to Myanmar, Laos or Vietnam before entering the Chinese mainland.

Those flows should more than halve this year to about 800,000 tonnes versus previous years when between 1.5-2.8 million tonnes would be smuggled in, according to Wang Weidong, a sugar analyst based in southern China.

The crackdown comes as Beijing faces pressure from industry to extend hefty sugar import tariffs beyond 2020 and keep growth in licensed imports into China historically low.

“Chinese authorities have really clamped down on that (smuggling trade) this year. It’s been shut down for all intents and purposes,” said a source a London-based sugar trader with ties to Asia.

Traders and analysts in London and Beijing said they expect the clamp-down to continue.

International Sugar Organization (ISO) figures show the global market will record a deficit of nearly 5 million tonnes in the 2019/20 season, meaning Asia will be able to absorb some of the excess resulting from China’s crackdown.

However, following two straight years of surplus, the world market has some 95 million tonnes of stock to absorb, the ISO said. That is equivalent to about six months worth of demand and is disproportionately concentrated in Asia.

CHINA’S OFFICIAL IMPORTS SLOW

China’s tariffs should leave official sugar imports into the country little changed this year at around 3 million tonnes, said Justin Liu, China-based senior sugar analyst at Chaos Research Institute.

The lack of growth is unusual for a developing economy like China which has a sugar deficit, and shows Beijing is serious about protecting its domestic industry.

“With the domestic output and imports under the quota, China’s domestic demand can be met. Supply and demand is balanced. If China opens its market completely, the domestic sugar industry will be doomed,” said Weidong.

“Everyone is speaking from their own interest. Why produce so much when you can’t consume it?” he added.

China in May 2017 hit major exporting nations with hefty tariffs on sugar imports, and started to levy extra tariffs on out-of-quota sugar imports from all origins in August last year.

The measures, with the smuggling crackdown, have helped push Chinese white sugar prices up some 20 percent this year, after they sank to near four-year lows last year.

(GRAPHIC: China sugar smuggling crackdown leaves global storage headache - )

THAI STOCKS BUILD

China’s smuggling crackdown has also contributed to a build-up of stock in Thailand, some of which made its way onto global markets mid this year via record deliveries against ICE futures contracts.

Analysts Green Pool said Thailand, the world’s second largest exporter, was sitting on nearly 7 million tonnes of stock at end-September, 1.1 million tonnes more than last September and nearly 3 million more than the previous two years.

“In an ideal world they would have sold all their stock by September,” Green Pool analyst Tom McNeill said. A large proportion of this stock will have to be cleared by the end of the year to make way for the new crush, he added.

Industry sources say Thai raw sugar is again trading at a premium to the ICE futures, indicating the supply-demand balance in Asia is starting to tighten. But the China crackdown still leaves Asian markets with unwelcome excess supply.

(GRAPHIC: Thai sugar stocks - )