Rising freight rates are deterring cash sugar demand this week and may be sidelining Indian buyers, traders and shipping brokers said on Wednesday.
They said strong demand for North and South American grains had pushed up freight rates, with some ship owners seeking around $55-60 per tonne to move sugar between south Brazil and west India, up from around $50 in recent weeks.
"Freight rates are increasing due to buoyant demand for grain from South America and the United States. We are seeing some sugar orders, but ship owners are charging higher rates."
A senior trader with a London house said that sugar futures markets had risen too far recently, deterring physical sugar enquiries this week.
"We need the futures market to come down, or the freight to come down, or both. The Brazilians will buy raws on the dips," he said.
Vinay Kumar, managing director of India's National Federation of Cooperative Sugar Factories Ltd, told Reuters on Tuesday he was not aware of Indian buying of raw sugar in the international sugar market this week. India is the world's biggest sugar consumer.
Another Indian buyer, S.L. Jain, member secretary of the Indian Sugar Exim Corporation (ISEC), told Reuters this month he expected Indian buying to resume before the end of this year.
Sugar merchant ED&F Man Sugar Ltd said in a report on Tuesday that India, which has suffered from successive poor harvests because of drought, is expected to need more than one million tonnes of raw sugar over the next six months.
However, one senior European trade source told Reuters that basis current prices, India is unlikely to be a buyer of raw sugar in the coming six months, having already committed to buy 500,000 tonnes of raw sugar.
On the NYBOT raw futures market, March sugar slipped 0.02 cent to close at 8.93 cents a lb on Tuesday, trading from 8.85 to 9.05 cents.
Sugar merchant Czarnikow said in its October sugar review that the Indian Sugar Exim Corporation (ISEC) bought 145,000 tonnes of raw sugar for delivery in the October/November period.
The tonnage was purchased in two separate tenders of 120,000 tonnes and 25,000 tonnes respectively.
The sugar was procured under the advanced licensing scheme, which grants millers 24 months to re-export the sugar.
In the whites market, medium-grade Brazilian and Thai sugars will seize market share of higher quality EU sugar exports to African and Middle Eastern markets, traders said.
They said that at a time of rising sugar prices, buyers would be less prepared to pay premiums for the highest quality sugars.
Brokers noted enquiries from private Iraqi white sugar buyers this week, and said Iraqis would likely consider both EU and Brazilian origins.