Middle East Sugar Refining Boom Spurs Rare Delivery to ICE

  • Al Khaleej sold at least 200,000 tons through ICE in London
  • Sugar market changing due to excess refining capacity in MENA

The expansion in Middle East sugar refining is encouraging the region’s producers to sell through the London exchange for the first time in almost a decade.

Al Khaleej Sugar Co. delivered at least 200,000 metric tons of white sweetener to ICE Futures Europe on Friday to settle the expired March contract, according to two people familiar with the deal, who asked not to be identified because the information is private. That was the first sale of sugar from Dubai through ICE since 2006, Societe Generale SA said.

Sales through ICE are now more attractive because London futures are fetching a higher price than in the physical market in the Middle East and North Africa. That’s because refiners in the region keep boosting capacity. While Al Khaleej used to get a premium for selling sugar locally, the advantage is now “negligible," Managing Director Jamal Al Ghurair said Feb. 1.

“The futures market was the best home for physical whites," Robin Shaw, an analyst at London-based broker Marex Spectron Group, said in a report Monday.

Processing capacity in the region will shift to a 6.1-million-ton surplus in 2018 from a shortage this year, Yves El Mallat, chief executive officer of Arabian Sugar Co., which owns Bahrain’s only refinery, said earlier this month.

The premium that refined sugar commands over the raw type earlier this month reached a two-year high of $119, encouraging more processing. While that has since fallen to $90, delivering through ICE is still favorable, said Naim Beydoun, a broker at Rolle, Switzerland-based Swiss Sugar Brokers.

“Exchange delivery was the optimum thing for our business model" because of the change in local prices, said Abishek Nanda, a trading manager at Al Khaleej.

ED&F Man Holdings Ltd. bought all of the 313,050 tons of sugar delivered to ICE, Jascha Raadtgever, managing director of sugar at the London-based trader, said Monday. Deliveries from Dubai totaled 206,600 tons, with the rest from Guatemala, ICE data show.

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