Thai millers have jacked up white sugar output to exploit the high refining premiums and seasonal demand ahead of the Muslim fasting month of Ramazan, but they risk flooding an already oversupplied market, dealers said on Wednesday. Thai millers have been rushing to melt raw sugar into whites to get better returns after raw futures in New York plunged to a 2-1/2-year low due to a third consecutive global surplus, while freight rates to Asia from top producer Brazil increased by a couple of US dollars in the past month.
White-over-raws premiums rose to between $118 and $120 a tonne for May delivery in April from $99.50 in February as the Middle East starts buying sugar ahead of Ramazan in July. The premiums, which measure refining profitability, are within sight of a 6-month high of $126 to $127 in March. But Thai sugar also faces stiff competition from India, Pakistan and Bangladesh which have plenty of excess sweetener at their disposal, while a looming harvest in top producer Brazil threatens to cut global prices even further.
“The trend is for the white-over-raws premiums to go up for now and probably come down a bit from the third quarter to around $100,” said a dealer in Singapore. “We”re likely to see lower premiums. Thai millers may be over confident about demand.” As more raws are refined into whites, premiums for the widely traded Thai high polarisation variety jumped to their strongest since last August at 130 points to New York”s May contract, turning off demand for prompt delivery. “I would suspect the obvious supply situation is going to affect alternately both raws and whites,” said Luke Mathews, a commodities strategist at Commonwealth Bank of Australia.
