Cheaper freight helps Brazilian sugar undercut Thailand in Asia

Wednesday, 30 April 2014 00:00 - - {{hitsCtrl.values.hits}}

Key freight index down more than 50% so far this year

Reuters: Falling freight rates have opened the way for top sugar exporter Brazil to boost sales to major customers in Asia and the Middle East and made it harder for mills in rival Thailand to sell their output after a record cane crush. Even though Brazil is much further away than Thailand from these regional markets, Thai exporters now face pressure to cut prices in order to compete with high-quality Brazilian raw sugar, European and Asian dealers said.

Freight market players say rates for larger panamax size vessels, which haul 60,000 tonnes cargoes of dry commodities such as grain, have been hurt by buyers in China defaulting on cargoes of soybeans from the United States and South America. The Baltic Exchange’s panamax index has fallen by more than 50% so far this year. In March, just 6,500 tons of Thai raw sugar was sold to China, one of the world’s leading raw sugar importers, compared with 290,000 tons from Brazil, said Tom McNeill of Green Pool Commodities. “New refineries prefer Brazil quality,” McNeill said in a Q and A session at the Reuters Global Softs Forum. Brazil is the world’s top sugar exporter, followed by Thailand. Thai sugar stocks are forecast to hit a record high before the end of the crushing season in April because of slow demand and aggressive competition from Brazil, according to Green Pool. “Thai sugar shipments fell by half since early this year as most major buyers, including Indonesia, South Korea, Japan and Malaysia have switched to buy from Brazil,” a Bangkok-based trader said, referring to Thai sugar exports that have dropped from around 400,000 tonnes a month. Traders said Thai sugar millers may have to cut prices to win back business. High quality Thai raw sugar for May shipment was offered at 0.75 cents to 0.80 cents over New York’s front-month contract this week compared with a discount of 0.10 cents to 0.15 cents for comparable Brazilian supplies. An increasingly virulent avian flu epidemic in China has curbed soybean and corn demand in the region. The soybean defaults had added to the availability of vessels for hire, sugar traders said. “The deteriorating margins of Chinese soybean crushers dissuaded buyers from coming to the market, and even brought them to cancel some deals that had already been struck,” said Marc Pauchet with brokers ACM Shipping.