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Brazil to boost sugar sales to Indonesia as Thai supplies tighten

Tightening Thai sugar supplies will likely drive up their premiums further, and give Brazilian exporters an opportunity to eat into Thailand’s dominant market share in Indonesia, despite a freight and import duty disadvantage, traders say. Indonesia, the world’s number 2 sugar buyer after China, is a net importer of raw sugar to its refineries.

May shipment of very high quality prompt centre-south Brazilian raw sugar was quoted this week at a discount of 8 points to New York May futures, compared with a premium of 139 points over May futures for high quality Thai sugar. After stripping out freight and duty differentials, Brazilian and Thai sugar are similarly priced for the Indonesian market, but buyers often prefer to receive supplies more promptly from Thailand as it is nearer.

“Brazil (sugar) has a very long distance to travel and that takes a very long time, like 45 days, when it is only about 7 days for us. That gives us an edge,” said Prasong Serisathien, general manager of Bangkok-based Siam Sugar Export Co Ltd. “Brazil’s sugar is admittedly of higher quality than ours, and even plus freight costs it is still cheaper than ours, but clients cannot wait.” Wisnu Hendraningrat, director at Indonesian refinery PT Andalan Furnindo, said that when Thai sugar supplies were tight, Indonesia would seek supplies from Brazil and Australia.

He declined to estimate how much raw sugar the Indonesian refining industry would source from Brazil due to the drought in Thailand, the world’s number 2 sugar exporter after Brazil. Another Indonesian refinery source said he was optimistic that he could source raw sugar from Thailand despite the dry weather, but said the price would be higher than usual. A second source from the same refinery said he expected to source Thai supplies until June, but after that he might have to seek Brazilian sugar. An import duty benefit for Thai raw sugar into Indonesia, coupled with a strong white sugar premium, comfortably above $100 per tonne this week, a healthy margin for refiners, augured well for demand for Thai sugar this year.

(Reuters)

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