South Asian physical sugar demand slows

South Asian physical sugar demand slowed this week after a rally in futures, but enquiries are brisk auguring well for a renewed spurt in demand, European operators said on Wednesday. India and Pakistan are key drivers of global sugar demand after drought harmed their crops. India is the world's biggest sugar consumer. Pakistan has booked more than 200,000 tonnes of raw and refined sugar for February to April shipments, and traders in Asia said the South Asian country would soon finalise deals to purchase around 120,000 tonnes of white sugar.
Pakistani enquiries on the cash sugar market picked up over the past week after the country removed a 25-percent import duty on refined and raw sugar. Pakistan said on Tuesday it had withdrawn a six percent levy on imported sugar cargoes.
One European broker said some of the trade now feel that Pakistan may have already covered the bulk of its requirement for the year, and that physical sugar trade is quiet.
"The market is looking more limited as far as significant upside potential is concerned," the broker said.
"A looming large centre/south Brazilian crop does nothing to alleviate this feeling," the broker added.
A trader said, "The trade may want to see futures come off in order to trigger more physical interest."
Liffe benchmark May white sugar futures were trading down 50 cents at $275.0 a tonne on Wednesday morning, pulling back after a rally to a contract high of $278.0 last Friday.
A second broker referred to offers by two trade houses of EU white sugar in containers to Pakistani buyers at Liffe May plus $55-56 to Karachi cost and freight.
One trade house was offering Dubai whites in containers, and two merchants offered a March cargo of Brazilian 150 ICUMSA sugar at $323 a tonne cost and freight Karachi, a broker said.
Indian import demand has slowed down due to sentiment that the 2004/05 crop is not as bad as earlier anticipated and that a cut in its sugar import duty was not likely any time soon, and Indian domestic prices are weaker, brokers said.
"The current consensus is that this Indian harvest is better than expected, and that there will be a better than expected recovery for the next crop," a third European broker said.
"Two months ago, traders were 'talking' Indian production down to below 10.0 million tonnes. The consensus is now 12.0 million tonnes," the broker added, reflecting the views of other operators.