In the main producing area of Guangxi white sugar prices ex-factory fell to 2,700 yuan ($325) to 3,000 yuan per tonne from 3,000 to 3,700 yuan two weeks ago, traders said.

The sugar industry plans to close mills and cut production capacity by 300,000 tonnes in 1999 to ease losses, the People's Daily newspaper said this week.

The government also said in November it was setting a guiding price of 3,700 yuan to 3,900 yuan and said mills should not sell below that level, but some mills were ignoring the guidance, traders said.

"Sugar mills need cash so they sell below the guiding price," a trader said. He said mills were selling the sugar but not issuing invoices for the sales to conceal the price from authorities.

Demand in China was weak while the new crop season meant more sugar was coming on to the market, raising the possibility sugar prices may fall further, atrader said.

Elsewhere, traders said they expected Indonesia to continue buying sugar from China, Thailand and Pakistan.

Indonesia was buying white sugar from Pakistan and Thailand in amounts of about 2,000 tonnes per shipment, one trader said.

The premium for Thai raw sugar premiums over Coffee, Sugar and Cocoa Exchange prices for January/March and March/May was 50 to 65 points

The May/July premium was 60 to 70 points.

The Thai white sugar premium over London prices for arch/April was $4 bid, with no offers, traders said.