India, the worlds largest sugar consumer, started making inquiries for Thai whites as speculation intensified that the government might allow imports, raising hopes for a rise in premiums, dealers said on Wednesday.
Domestic prices in India remained high, above 2,000 rupees per ($39) per 100 kg in the main producing state of Maharashtra, even though the government allowed duty-free imports of raws last month, spurring talks it could also let dealers buy white sugar.
"I think the Indian government wants to cool down the domestic price by sending signals its going to import white sugar. However, I heard nothing in terms of deals," said a dealer at an international trading house in Bangkok.
"There have been some inquiries from Indian traders, but they are only asking for small lots, of around 200 to 300 tonnes. It seems they are not satisfied with the prices." May white sugar ended $4.70 higher at $385.20 per tonne on Tuesday, moving away from a near five-week low of $373.9 on Monday on talk that Indias government had asked the election commission for permission to remove the import duty on whites.
While dealers in Bangkok waited for more inquiries from India, premiums for Thai raw sugar firmed to 70 points over New York futures for March shipments from 65 points last week, reflecting steady demand from South Korea and Middle East. Premiums for refined sugar were unchanged at $20 over London futures but dealers said the value could rise in the next few weeks on expectations of more buying from consumers such as Indonesia and India.
"India last imported white sugar about three years ago. They would much prefer to buy raws and certainly the mills would. But I think the government is paving the way for the imports of whites," said a senior dealer at a trading house in Australia.
"The sugar may come from Brazil but the logical places will be Asia, given the differences in white freight are a lot more than the differences in raws freight," said the dealer, adding that Thailand could offer the most competitive prices.
Freight rates for the shipment of white sugar to India from Thailand stood at $28 a tonne, while rates from Brazil were much higher, at between $55 and $60 a tonne. For raws, the shipping costs to Asia from Brazil were about $33 a tonne, said dealers.
India has called general elections in April and May and there are doubts whether the independent Election Commission would allow the government to make policy changes that will be seen as unfairly influencing voters.
India has so far contracted to buy about 800,000 tonnes of raw sugar from Brazil, the worlds main sugar producer, to compensate for a shortfall in output, said dealers. In Indonesia, dealers said the local market was still digesting news the government may allow the imports of as much as 150,000 tonnes white sugar for household consumption in the period up until April. "I dont think it will happen," said a dealer in Jakarta, adding that import permits should have been issued by now for arrivals no later than end April.
The government would normally permit four state firms to buy white sugar for household consumption. The four firms can either buy sugar themselves or appoint other firms to do it. In Australia, dealers said another cyclone off the coast of the tropical state of Queensland, which grows more than 90 percent of the countrys sugar cane, may be beneficial to crops, bringing timely rain in some areas that escaped flooding last month.
Last months floods are estimated by the Australian Bureau of Agricultural and Resource Economics to cut the yield potential of the 2009/10 harvest by about 6 percent but raw sugar production is forecast to decline only 2.3 percent to 4.56 million tonnes as the area planted with cane has increased slightly.
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