Millers in Thailand, the world’s second-largest exporter, are increasing production of refined sugar after the premium over the raw variety soared, according to the country’s biggest shipper.
The refined premium climbed 62 percent in 2012, reaching the highest in almost a year, data compiled by Bloomberg show. Demand from the Middle East and North Africa, combined with the end of the crop in the European Union and a delay to harvesting in top producer Brazil, are limiting supplies of the refined or white sweetener, according to Naim Beydoun, a broker at Rolle, Switzerland-based Swiss Sugar Brokers.
“Prices of white sugar are attractive, drawing some mills to buy raws to re-melt them into the white variety,” Piromsak Sasunee, chief executive officer at the Thai Sugar Trading Corp., said in an interview yesterday in Bangkok.
The refined price has also been bolstered by demand from Muslim nations before the fasting month of Ramadan, Piromsak said. Ramadan begins next month. White sugar was $142.83 a metric ton more expensive than raws by 11:21 a.m. London time. Yesterday the premium was $143.27 a ton, the most since July 1, according to the data.
“The strength of the white premium is self-explanatory; EU sugar supply is almost inexistent,” Beydoun said in a report. Whatever remained has been earmarked to destination sales in the Middle East and North Africa, he said.
Thai Sugar Premiums
The re-melting of raw sugar into refined will help boost the premium paid to obtain raws from Thailand in the physical market. Premiums have been rising because Chinese buyers raised purchases over the past two weeks, according to Paul Bannister, head of the sugar brokerage at Marex Spectron Group in London.
Buyers of Thai raw sugar for June loading were paying a premium of 1.80 cents to 2.50 cents a pound to the July contract on the ICE Futures U.S. exchange in New York on June 10, Swiss Sugar Brokers data show. That compares with premiums of 1.7 cents a pound on May 5 and 1.35 cents on April 29.
Prospects of delayed crops in Brazil will also help drive the Thai raw sugar premium higher, Piromsak said. Rainfall in Brazil’s main growing area is delaying the harvest and creating a backlog of vessels at ports. The amount of sugar waiting to be loaded at ports in Brazil climbed 37 percent in a week, according to June 6 data from Williams Servicos Maritimos Ltda.
For the moment, offers of refined sugar from Thailand are “tight” because of logistical constraints and because white sugar delivered against the expired May contract on the NYSE Liffe exchange in London is still being loaded, Beydoun said.
Thailand may export about 2.3 million tons of white sugar this year, Piromsak said. Shipments of the raw variety are estimated at 5.5 million tons, he added. More than 80 percent of the sugar to be exported has already been sold, he said.
“Thailand should be able to take more share from Brazil as the country is located near importing nations in Asia,” Piromsak said, adding that demand for Thai sugar was strong, especially from Indonesia, Japan and South Korea.
White sugar for August delivery slid 0.2 percent to $586.40 a ton in London.