Al Khaleej, World’s Top Sugar Refinery, Closes on Slowing Demand

Al Khaleej Sugar Co., owner of the world’s largest sugar refinery, stopped processing at its factory in Dubai because demand slowed and silos are full, according to Jamal Al Ghurair, the company’s managing director.

The refinery stopped processing last week and won’t reopen until stockpiles are reduced, Al Ghurair said in an interview at the Kingsman conference in Dubai today. That may take about 10 days, he said. Al Khaleej, which has installed capacity to produce 6,000 metric tons a day and buys raw sugar to process into the white variety, had been operating on and off, he said.

“Normally, when the price goes too much down, people stock sugar more,” Al Ghurair said. “At the moment, we don’t see that. But we are hoping it will come soon. People want to keep cash to their chest and they think that the price will go lower later.”

Al Khaleej plans to process 1.5 million tons of sugar this year, a “small increase” from the 1.3 million tons a year earlier, Al Ghurair said. Most of the company’s raw sugar imports are now coming to Dubai to be refined because demand from other countries also slowed, he said. Al Khaleej usually buys raw sugar for refining and for trading.

“We have a commitment of off-take and normally we re-sell it in the world market and this time we’ve got it here because we could not sell it somewhere else, so it has to be dumped in this region,” he said. The sugar needs to be refined once it arrives at the processing plant, he said.

Sugar Prices

Raw sugar fell 16 percent last year and 27 percent in 2011, the biggest two-year loss since 1999. The commodity, which was the third worst performer in the Standard & Poor’s GSCI gauge of 24 raw materials last year, is down 3.2 percent this year. A third year of declines would be the longest slump since 1992.

Sugar may fall to 16 cents a pound this year as a bigger crop in Brazil, the world’s largest producer, adds to a global surplus, he said. Brazil’s center south, the country’s main growing region, will produce a record 570 million to 600 million tons of sugar in 2013-14, Mike Gorrell, head of Imperial Sugar Co., a unit of Louis Dreyfus, said today.

“The Brazilian crop is going to be bigger and they are trying to start the crop earlier,” Al Ghurair said. Millers may be able to start two to three weeks early, he said.

Demand for the company’s white sugar may improve closer to summer as Muslim nations start stocking the sweetener ahead of Ramandan, he said. Al Khaleej, which was buying sugar from India last year, is now getting most of its sugar from Brazil as exports from the South Asian nation came to a halt, he said.

Raw sugar for March delivery rose 0.6 percent to 18.89 cents a pound on Feb. 1 on ICE Futures U.S. in New York.

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