• Logistics is one of Brazil’s main weaknesses, Tereos CEO says
  • Ship queues to support sugar prices in next few months

Congestion at Brazilian ports that’s delaying sugar shipments will send prices higher in the next few months, according to Tereos, the third-biggest producer in the country.

Logistics are Brazil’s biggest weakness, Alexis Duval, chief executive officer of Tereos, France’s largest sugar producer, said in an interview in Paris Tuesday. On Monday, vessels were waiting to load 1.85 million metric tons of the sweetener in the world’s top producer, SA Commodities data compiled by Bloomberg show.

"In the short term we will see some pressure," Duval said. "Then I think that things should go back to normal" when supplies improve, he said.

Raw-sugar futures traded in New York rallied to the highest since 2013 this week as ships lined up at Brazil’s ports to load more than double the amount of sugar compared with a year earlier. Bottlenecks have emerged as an early start to the cane harvest in the nation coincided with a large soybean crop.

With higher prices and a weaker Brazilian real, millers in South America’s biggest economy have started making profits again after struggling for years. Sugar has also gained as global supply is set to fall short of demand by 5.6 million tons in the 12 months starting October, according to Tereos. That will follow a 5.3 million-ton deficit this season, it estimates.

The company posted a net loss of 34 million euros ($39 million) in the year through March, reversing a profit of 17 million euros a year earlier, it said Tuesday. While adjusted earnings before interest, taxes, depreciation and amortization declined by 59 million euros in Europe, it rose by 34 million euros at the company’s overseas business, boosted by Brazil, it said.

Tereos wants to keep its production costs in Brazil at about 10 cents a pound even if inflation rises or exchange rates increase, Duval said.

Industry consolidation in Brazil will continue at a slow rate, as it has done in the past decade, because many businesses are still family-owned, according to Tereos. The country’s legal system also means bankruptcy processes are long and the risk of litigation makes it harder to make quick acquisitions, he said.

Tereos will focus on acquisitions that boost its competitiveness, something it has previously done by buying operations located near its existing mills, Duval said.

"If we identify some opportunities in the coming years, we will definitely try to seize them but there’s no target," he said.

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