Thailand may sell more sugar to Europe if the EU approves a duty-free import quota for 200,000 tonnes, potentially lifting premiums despite a record output in the world's second-largest exporter, industry officials and traders said on Wednesday.
Europe is not a major buyer of Thai sugar because the continent produces its own sugar beet, but the European Union often buys cane sugar whenever there is a shortfall. Last year the EU imported just 2,981 tonnes of sugar from Thailand.
"Thailand is now a major supplier in this region (Asia) and has capacity to sell as we have plenty of sugar to sell this year," said Prasert Tapaneeyangkul, secretary-general of Thailand's Office of Cane and Sugar Board. "However, the deal is likely to be done through international trading firms." Indonesia, Malaysia, Japan, South Korea and the Middle East are the main markets for Thai sugar. There were no reports of inquiries from trading houses yet ahead of the EU vote on imports.
"I guess there's nothing new from my side of things. There are only one or two enquiries from the inter trade on small volumes of Thais they are keen to sell," said a dealer in Singapore, who trades Thai sugar. An EU committee will vote on Thursday on whether to open a duty-free import quota for 200,000 tonnes of raw or white sugar, and vote on a proposal to hold fortnightly tenders from July until the end of September for imports.
The proposal to open a fresh import quota is designed to address a continued shortage of sugar supplies on the EU market, created in part by high world sugar prices limiting imports from the bloc's traditional African, Caribbean and Pacific suppliers.
Demand from the EU was likely to push Thai premiums higher in the coming weeks as international trading houses were likely to turn to Thailand for supplies if they won EU contracts, dealers said.
Thailand has produced a record 93 million tonnes of cane, or 9.45 million tonnes of raw sugar, prompting the extension of its current 2010/11 sugar crushing season by a month to the end of May. It set aside 2.8 million tonnes of the sweetener for domestic consumption, leaving some 6.6 million tonnes for export this year, which would be a record.
With such plentiful supply, Thailand is able to undercut major competitors such as Brazil in the European market. At least 98,625 tonnes of Thai sugar was shipped to Russia from January to April, nearly five times the 21,200 tonnes sold in the same period last year, and Moscow was expected to take more because of competitive prices.
"Fresh demand will help boost premium on Thai sugar in general at least in the short term from now on," said a Bangkok-based trader. The premium on Thai raw sugar was offered at 200 points over New York raw futures on Wednesday, the highest since early May, while the premium on white sugar was steady at $65 per tonne over London white sugar futures.
Premiums for Thai sugar had been under pressure from rising output in Thailand before congestion at the ports in top producer Brazil ignited fears about immediate supply and helped lift the value to current levels. ICE July raw sugar futures gained 0.40 cent to finish at 21.91 cents per lb on Tuesday, while Liffe August white sugar rose $10.20 to settle at $623.10 per tonne.
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