Soaring freight rates are piling pressure on sugar buyers and may force Indian millers, who need to import after drought-hit cane harvests, to buy whites rather than raws, analysts said on Wednesday.
Shipping brokers estimated that bulk sugar freight rates, driven up by strong demand for grains, had risen by $10-15 per tonne in the past month to some $60-$70 on the key route from south Brazil to western India.
"There is no sign of any of the bigger buyers reaching for their wallets. Domestic prices in India, China and Russia have all slipped a bit this week," a broker said.
A senior trader with a London merchant said: "Freight is cutting off some trade - freight is up about $15 a tonne from where it was a month ago."
Traders said Indian demand might switch to whites from raws if purchases were deferred beyond the current harvest season, which ends in April in most regions.
They noted talk that a merchant had recently cancelled a deal to sell a couple of cargoes to Indian buyers, possibly because it found itself short of freight.
"It appears less likely by the day that we will see more Indian raw sugar imports under the advanced licensing scheme (ALS)," one operator said.
The ALS grants Indian millers 24 months to re-export sugar.
Brokers and analysts estimated that a Dubai refiner may have accumulated 400,000-450,000 tonnes of stocks, and said that figure could increase sharply over the next month.
"I am sure the refiner is hoping that India is running out of time to import raws," a trader said.
They said the refiner could be preparing to sell large quantities of white sugar to Indian buyers and to other markets in the Middle East and Asia.
Trade buyers have been piling into US raw sugar futures to try to keep them above 8.96 cents a lb this week in a bid to push the Russian sugar import duty lower, traders said.
NYBOT March futures gained 0.12 cent to conclude at 8.85 cents a lb on Tuesday.
The Russian duty, fixed monthly and now standing at $180 a tonne, has an inverse relationship to US futures prices.
It could fall to $140 a tonne if US futures stay buoyant, potentially stimulating physical demand from Russia, the world's biggest raw sugar importer, traders said.
Russian physical demand has been less than expected in recent months as its stocks fell, and the country has reported a good beet sugar harvest this year.
Traders said physical demand from Taiwan had provided trade support to the NYBOT and Liffe futures markets this week.
The state-run Taiwan Sugar Corp has sealed a deal for 34,000 tonnes of white, bagged sugar from Dubai's Al Khaleej Sugar Co (AKS), said a company source on Wednesday.
The white sugar shipment is for delivery between December and March, said the source.
Taiwan Sugar also signed a deal on Tuesday for 35,000 tonnes of raw sugar with Australia's Queensland Sugar Ltd for delivery between March and April.
Taiwan Sugar is the island's only refiner and is now the main importer
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