White-over-raw sugar premiums held steady in Asia this week, but were high enough to encourage mills in Thailand to produce more refined sweetener to help meet buoyant Middle Eastern demand. White-over-raws premiums, which measure refining profitability, started rising in June, ahead of the Muslim holy month of Ramadan, when nightly feasting typically drives a rise in consumption of white sugar. But last week premiums fell to $114 to $115 a tonne.
This week the premium stood at $116 per tonne. "We continue to produce more white sugar as the white premium is good and there is strong demand for white sugar in the Middle East," a trader at one of Thailand's leading milling firms said on Tuesday. Despite incentives to produce more whites, dealers in Asia do not apprehend any shortage of raws. "I think raw sugar supply from Brazil can cover the shortfalls in Thai raw production in Asia," said a Bangkok-based trader.
The fall in Thai raw sugar premiums reflects traders' expectations. The widely-traded Thai high polarisation, or hipol raw sugar, was offered at a premium of 140 points to New York's front-month contract. The premiums stood at 110 to 150 last week. Thai hipol premiums rallied to 165 points in mid-June, the highest since the third quarter of 2012, as a result of attractive refining margins and higher Ramadan demand. Ramadan demand is almost exhausted now, traders said.
Capitalising on the demand, traders in India last month sealed deals to export about 75,000 tonnes of sugar. But despite having surplus stocks, India's higher domestic prices make exports difficult. Dealers believe trade will remain muted until global prices rise or domestic rates drop.
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