White sugar surging into Myanmar, smuggled to China

Strong flows of white sugar are moving from India and Thailand to Myanmar, a fast-growing destination, and much of that is believed to be smuggled into China, trade sources said. They said a clampdown on raw sugar import licences by Chinese authorities, a disappointing start to the Chinese harvest due to adverse weather, and high import margins into China, have spurred the trade.
The strong Chinese demand has contributed to pushing up whites-over-raws premiums on the Intercontinental Exchange to in excess of $100 per tonne this week, a very comfortable margin for refiners. White sugar is also believed to be smuggled into China via Laos and Cambodia, trade sources said.
"Shipments from Thailand to Myanmar and Laos have been very heavy in the last couple of months," a Western analyst said. "That's another route into China." European traders said more than 300,000 tonnes of white sugar had been exported from India to Myanmar in December, and the flows were believed to remain strong this month due to the huge import margins into China. White sugar was quoted at around $420 per tonne delivered to the Chinese border. Domestic prices in China are in excess of $800 per tonne.
Myanmar has become a leading conduit for smuggled sugar into China, traders and analysts said. In 2011/12, Myanmar was a minor destination for white sugar, importing less than 50,000 tonnes, the Western analyst said. Myanmar could import more than 1 million tonnes in 2015/16, he added. "The sheer volume of white sugar going into Myanmar for a country that was a non-player in the market, is remarkable," the analyst said.
A Southeast Asia-based trader said that last year more than 1.5 million tonnes were smuggled into China. It was not possible to verify that figure independently. "It should be still as strong on a monthly basis in 2016," the trader said. "Last year we saw very strong white sugar demand, especially in the second half, and it seems to be continuing."
European traders said that Indian and Thai domestic white sugar prices had been strong due to the hefty export flows from those two origins to Asian destinations. Physical Thai white sugar was quoted at $35-40 per tonne over ICE March white sugar futures ex-warehouse FOB Thailand this week. "The supply of Thai whites is very tight because of this trade," the Western analyst said.