Thai white sugar premiums are likely to be under pressure over the next few days as India, the world's biggest consumer of the sweetener, is offering white sugar at competitive prices, traders said on Monday.
Indian 100 ICUMSA white sugar was offered at $340 a tonne, cost and freight (C&F), Jakarta. Thai whites of the same grade were offered at $35 over London prices for January-March shipment, or around $342 a tonne, free-on-board.
It costs around $18-20 to ship one tonne of sugar to Jakarta from Bangkok. No Indian deals had been done yet, traders said. India, one of the world's largest sugar producers, is expected to offer whites aggressively in coming months, partly due to a need to clear warehouses to make room for a new crop due to be harvested later this month, traders said.
Indian mills, which import raw sugar duty-free, are obliged to export an equal quantity of refined sugar within a time limit. Traders say they have to sell around 500,000 tonnes of refined white sugar in 2006 to fulfil the obligation.
"Thai exporters need to lower their prices, otherwise they will lose market share to India, especially in the Indonesian market," said one trader.
Thai exporters have sold forward contracts for about 10 percent of the sugar, both raw and whites, they expect Thailand to produce in the crop to be harvested next month, traders said.
Traders said they expected buying interest from Indonesia to emerge in the next few weeks as the Jakarta government had issued licences for the import of 300,000 tonnes of white sugar between January and mid-May.
"There have been no enquiries yet from Indonesian buyers," said one trader. "But, one thing for sure, they will be looking at cheap sugar. The most important factor is the price."
Thailand is expecting heavy rain in most cane growing areas as the rainy season winds down this month, traders said. "We just came back from the fourth crop survey.
We have kept our estimate unchanged after what we saw over the weekend," said one trader. Traders estimate the new cane crop at 40-43 million tonnes, or about 4.5 million tonnes of sugar, 10-15 percent less than the 47 million tonnes of the previous crop due to drought.
Two million tonnes of sugar have already been allocated for domestic consumption with the rest left for export next year, traders said. Several vessels were due to arrive in Thailand to load raw sugar for Japan and Indonesia, and 5,500 tonnes of white sugar for North Korea in the next few weeks, shippers said.
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