Slowing Indian Sugar Exports Seen Boosting Thai, Brazil Sales In Asia
An expected slowdown in Indian sugar exports, as domestic prices surge, will boost the market share of Thai and Brazilian sugar in Asian markets, traders said on Tuesday.
London: An expected slowdown in Indian sugar exports, as domestic prices surge, will boost the market share of Thai and Brazilian sugar in Asian markets, traders said on Tuesday.For latest news on Business & Budget 2017, like us on Facebook and follow us on Twitter.
The government will soon scrap an order that requires sugar mills to export excess supply, two officials said on Monday, after back-to-back droughts look set to turn the country into a net importer next season and open the door to rival suppliers.
Traders said the news came as little surprise as many had expected that India, the world's number 2 sugar producer after Brazil, would swing next season to a net importer from exporter after drought ravaged production.
India, also the world's top sugar consumer, has been a major source of low quality white sugar shipped to Myanmar, much of which was then smuggled into China, traders said.
Over the past several weeks, flows of white sugar to China have slowed after brisk trade into the country in the fourth quarter of last year, they added.
"With India now marginalised, and if Chinese demand does pick up again, the sugar (for China) will come from Thailand and other sources," a senior European physical trader said.
Indian mills are now prioritising sales to the local market to benefit from higher domestic prices as supplies tightened.
Traders said they expected Indian mills to lose market share in Asia to exporters from Thailand, Middle Eastern and Indian tolling refineries, as well as from Brazil.
Tolling means importing raw sugar, refining it into high quality white sugar and re-exporting it.
Traders said Thai sugar was likely to be the first choice of buyers in Asia as freight costs and shipping times were less than from Brazil.
However, current cheap freight costs had made Brazilian crystal, or 150-ICUMSA sugar, competitive with Thai and tolled supplies in Asian markets.
Excluding freight charges, traders quoted Brazilian crystal sugar at a $20-25 discount to benchmark August ICE white sugar futures, compared with $20 over futures for high quality, 45-ICUMSA Thai supplies.
Traders said they expected tight supplies of white sugar, combined with strong demand from markets in Asia, the Middle East and West Africa, to keep the whites-over-raws premium buoyant in coming months.
The nearby whites premium was in excess of $100 per tonne this week, a comfortable margin for refiners.
© Thomson Reuters 2016
Story first published on: May 03, 2016 23:13 (IST)