ICE Futures US said on Wednesday a fire at an inland storage facility in Brazil that services the port of Paranagua may disrupt shipments of raw sugar from the world's No 1 producer ahead of the expiry of the July contract on June 28. The extent of damage and its impact on operations at the CPA Terminal in Sarandi are not known to the exchange, but the fire may affect the ability of shippers to load sugar at Paranagua, a major sugar exporting port on the south coast, and any other export port serviced by that facility, it said.
ICE said market participants considering making delivery against the July futures contract should be aware of the issue and should take whatever steps are appropriate to ensure that they are able to meet their commitments. Attempts to reach CPA Armazens Gerais for comment were unsuccessful.
A fire broke out at the Sarandi facility last week, but it was "controlled and operations carried on normally," Samar Razzak, a spokeswoman for the Paranagua port, said by telephone. Sugar traders said they knew of the fire and that they were not concerned about nearby supplies. Prices have hit near three-year lows recently, under pressure from ample global supplies.
Even so, the exchange's warning about a potential disruption could make some investors nervous about immediate supplies. Brazilian exporters are already dealing with vessel line-ups at ports, as they look to ship bumper crops of soybeans, corn and sugar. "Any problem is not welcome for a logistics system already being strained," said Michael McDougall, senior director of the Brazil desk for Newedge in New York.
Traders said last week they expected a large physical delivery against July. Last Thursday, July sugar prices hit 16.17 per lb, the lowest price since July 2010, weighed down by expectations of a big surplus over the next few years. Prices have risen 6 percent since then, hitting 17.08 cents on Wednesday in a technical bounce and on short covering, traders have said.