Pakistan, which has been importing sugar in recent years, has struck its first export sale in five years and could ship as much as 300,000 tonnes in the next nine months, a senior industry official said on Wednesday.
The deal to sell 1,000 tonnes of white sugar to Sri Lanka was sealed at $335 a tonne, free on board, for February shipment in containers, Najib Balagamwalla, chief executive of top commodity trader Seatrade Group, told Reuters.
Pakistan producers are increasingly looking abroad after the government raised import duties and removed an export tax, signalling it believed domestic supplies were comfortable. "We have just closed the deal. We are aiming to sell another 20,000 tonnes to Southeast Asia and Middle East destinations. Negotiations are at an advanced stage," said Balagamwalla.
"If London prices rise a little more, we should be able to do a couple of bulk deals," he added. However, a senior London sugar trader said the Pakistan news was bearish.
"There's too much white sugar already," he said, adding: "There is no demand. It adds more salt to the wound." White sugar futures in London, which have lagged the broader rally in commodities prices due to big production in Brazil and India, hit a 13-month peak of $361 per tonne on January 18.
The benchmark March contract was up $4.80 to $349.30 per tonne at 1247 GMT. "We can export up to 300,000 tonnes with having any problems about supplies in the domestic market," said Balagamwalla, adding: "The domestic situation looks pretty comfortable now."
In November, Islamabad raised the duty on sugar imports to 25 percent from 15 percent, sending out a signal that supplies had reached comfortable levels. Pakistan also removed a 15 percent duty on sugar exports in the same month, the first signs about its intentions to sell in overseas markets. But no deal had been materialised until now as Pak sugar prices were not competitive.
"We are facing tough competition from Indian sugar," said Balagamwalla. Pakistan is expected to produce between 4.3 million and 4.5 million tonnes of sugar in 2007-08, compared with 3.6 million tonnes last year. The country has an annual domestic demand for 3.9 million tonnes. It entered the new crop year with carryover stocks of 500,000 tonnes from the previous crop.
On top of hefty Indian exports, another record crop of Brazilian sugar is expected to weigh heavily on prices this year, Peter Baron, executive director, International Sugar Organisation, told Reuters earlier this week.