Al Khaleej Sugar Co plans to cut raw-sugar purchases in the first half after the owner of the world’s largest port-based refinery for the sweetener boosted inventories.
The Dubai-based company will buy almost nothing in the first six months of this year, Managing Director Jamal al-Ghurair said in an interview at the Dubai Sugar Conference. The United Arab Emirates imported the most raw sugar on record in the fourth quarter, according to shipping data compiled by researcher Platts Kingsman.
“We are not going to import anything now in the first two quarters of this year,” said al-Ghurair, who is one of the organisers of the conference, a private event for about 400 people in the industry. “Zero, almost. Hopefully we don’t bring anything in.” Raw-sugar shipments to the UAE totalled 943,000 metric tonnes in the fourth quarter, the most in data going back to 2006 and 30% more than a year earlier. All of the supplies came from Brazil, the world’s biggest producer, according to Kingsman. Al Khaleej boosted imports as prices for later-dated contracts traded higher than for earlier deliveries, al-Ghurair said. The scenario, known as contango or carry, encourages stockpiling and benefits refiners which buy to process and sell at a later date.
“The carry was in our favour when we bought the sugar,” al-Ghurair said. “We were trying to sell some back but it was at a discount, so therefore it was not possible to sell. So I said let’s keep it in stock.” The refinery’s 2016 imports will still probably remain unchanged from a year earlier, and there are plans to buy again later in the year when the market moves into a surplus due to supplies from Brazil’s crop, he said. The facility is operating at 70% of its 2.2mn-ton capacity, which is a “very good” rate, he said. While the premium that white, or refined, sugar futures command over the raw type is near a two-year high, that’s not being reflected in the physical market, al-Ghurair said. The start of a refinery in Iraq has boosted the region’s supplies, he said.
“The physical offtake is not so good,” he said. “We used to have a local premium and that local premium is almost negligible at the moment.” Demand for white sugar into Myanmar has increased due to cross-border trade with China, though it’s uncertain how long that will last, al-Ghurair said. China may be importing as much as 1.6mn tonnes of smuggled refined sweetener through countries including Myanmar, Laos and Vietnam, according to John Stansfield, an analyst at Group Sopex.
“Burma came out of nowhere,” al-Ghurair said, referring to Myanmar. “It’s a policy change in China that came on board.