Thai sugar premiums were firm on Monday but were expected to dip over the next few weeks, as demand was sluggish, traders said. Offers for Thai 100 ICUMSA white sugar, considered consumer grade, for August shipment were at $10 per tonne over London prices, or $474 per tonne free on board, up from $470 per tonne early this month.
ICUMSA measures the colour of sugar. The lower the ICUMSA level the higher the degree of whiteness. "London prices dipped at the end of last week and demand was very thin, so premiums cannot not stay that high," a trader said. "It is difficult to sell at such high premiums, especially when demand is very thin," another trader said.
London's benchmark August settle down at $464 per tonne on Friday on fund profit-taking from one-month highs touched. Thai premiums were expected to drop over the next few weeks as traders could not wait any longer to sell at higher prices, especially those with sugar on hand and needing to pay storage costs. "The longer they wait, the more losses they will have," a trader said.
Traders said the market was very quiet with Vietnam waiting for prices to touch bottom. "It's annoying. They asked about prices several times but have shown no action and I don't think they will buy," said a trader who was negotiating with Vietnamese traders.
The Vietnamese government has approved the import of 150,000 tonnes of both white and raw sugar, but has not issued import licences yet. Traders said Vietnam could wait until August to decide whether to buy as it was estimated to hold around 250,000 tonnes of white sugar in stock.
However, Indonesia, Southeast Asia's largest sugar buyer, might be in the market soon despite projected ample supplies this year, as some sugar mills had to suspend operations after an earthquake in May.
"Supply is okay, but imagine if the crushing period did not meet consumption demand, it would need to import," a trader said. Indonesia is projected to produce 2.48 million tonnes of white sugar this year, up from 2.24 million tonnes in 2005, while consumption is estimated at 2.6-2.7 million tonnes, almost the same as last year.
Indonesia withdrew a plan to issue more permits to buy white sugar in 2006 this year due to expectations of ample domestic stocks from this year's crushing season, which runs between May and October. "It could make decision in August after the beginning of crushing season whether it needed to buy," a trader said.