Thai sugar premiums tick lower; China seen buying

Thai sugar premiums inched down after recent rises in futures prices, but buying interest from China and tight prompt supply could offer support to the lethargic market, dealers said on Wednesday. Dealers, citing shipping reports, said raw sugar was being loaded at ports in top producer Brazil for shipment to China, which is estimated to face a sugar shortage of 2 million tonnes this year.
"There's quite a lot of raws either already arrived or on their way to China, but maybe they haven't gotten through the supply chain yet. It may be signalling there's a bit of prompt white sugar shortage in some regions," said a dealer in Singapore. "There's a lot of talk about the Chinese buying prompt white sugar from both Vietnam and Thailand. There's certainly quite a lot of vessels being loaded in Brazil for China."
China, the world's most populous country, said in May it would release 250,000 tonnes of white sugar from state reserves, the first such sales this year, to help cover a supply gap and cool domestic prices. But a slip in Thai raw sugar premiums for prompt delivery suggested that purchases by China could either be small or for forward months.
The widely traded high polarisation, or hipol Thai raw sugar, was offered at 180 to 200 points above New York's October contract, down slightly from 250 points last week, with no deals reported. There was, however, buying interest for shipments in the first half of next year as premiums also slipped. Premiums for J-spec, or raw sugar favoured by Japanese consumers, fell to 150 points from 180 points premiums last week.
"You can probably find buyers at 180 to 200 points premiums for hipol. The demand is not there. For Indonesia, it seems that importers are buying less and less," said a dealer in Singapore. "There's interest for March next year at 45 points to 50 premiums. The prompt market is dead." January-March 2012 premiums stood at 90 to 110 points last week.
Indonesia's white sugar production this year will reach 2.58 million tonnes, below a previous target of 2.7 million tonnes because of erratic weather, the Indonesian Sugar Council (DGI) forecast on Wednesday. The output forecast is still above last year's 2.3 million tonnes. The DGI said last week that Southeast Asia's largest sugar consumer may not import white sugar in 2012, given that its year-end inventory is expected to reach more than 1 million tonnes, above a safe level of 800,000 tonnes.
NEXT WEEK Premiums could be under pressure if sugar futures resumed their rally, but dealers also expected to hear more about demand from China. China's 2010/2011 sugar output is expected to slip to 10.5 million tonnes, from 10.74 million tonnes last year, government officials said. Some analysts have estimated China would face a deficit of 3 million tonnes this year.