GENEVA: Sugar prices could see a "race to the bottom" as the European Union seeks to regain share later this year in an increasingly crowded export market, industry participants said on Tuesday.
As the EU liberalises its sugar regime and boosts output from Oct. 1, the market is bracing for pricing pressure as EU producers compete for export markets, speakers said at the Kingsman EU Sugar Seminar in Geneva.
"Markets will be found," said Barry Callingham, senior trader at Bunge. "It's just a question of price. And they will chase the market down. It will be a race to the bottom."
Competition is expected to be particularly fierce in the Middle East and North Africa, where four of the world's top eight raw sugar refineries are located.
These four regional refineries have combined capacity to produce of 5.55 million tonnes of sugar a year, said Claudiu Covrig, senior sugar analyst at S&P Global Platts.
Some 4.6 million tonnes in additional capacity is set to come online in the Middle East and North Africa region by 2019.
West African and European markets with a sugar deficit present opportunities for EU producers, but these markets are also being targeted by producers in Russia, Ukraine and other countries with export ambitions.
Given it is still early in the season, the amount to be exported from the EU is still unclear.
"If it has to export 2.5 million tonnes, I think the EU can do that quite easily," said John Stansfield, trader and analyst at Group Sopex. "If we have to export 5 million tonnes ... I think that will be hard work."
Geraldine Kutas, head of international affairs for the Brazilian Sugarcane Industry Association (UNICA) said Brazil was not worried about competing for markets with the European Union but was concerned about the potential impact on global prices.
"I would like to warn the EU producers to be careful about what they will do to international prices," she said. "We should all be careful about how much sugar will be shipped in the international market."
Comments
Comments are closed.