Cash sugar operators were a bit glum on a higher-than-expected harvest in China although recent Indian purchases should shore up sentiment, brokers said Monday.
The China Sugar Association upped its forecast for the country's 2003/04 sugar output to 10.05 million tonnes from an earlier prediction of 9.8 million to 9.9 million as the local crush there drew to a close.
Combined with sales of domestic reserves, the likely appetite for the sweetener by the Chinese could be sharply scaled back this year.
"That throws some cold water on this market," a senior dealer for a commodity trading house said.
"That's not going to be helpful," added a brokerage house manager based in Europe.
With demand in China seen at 11 million tonnes, the level of imports will not be as large, if at all, going forward. Dealers point to the long standing government-to-government deal with Cuba for the supply of 400,000 tonnes of sugar.
China has already booked orders for another 400,000 tonnes and, with 500,000 tonnes in state reserves, traders said the Chinese may not be seen in the market until late this year or early in 2005.
"They really have no reason to chase this thing," one trading house analyst said.
The only helpful development for the market is talk that India has purchased several cargoes of sugar.
"Without that, we'll really be in the doldrums," a senior broker said, adding he expects the Indians to probably purchase a few hundred thousand tonnes of the sweetener in the coming months.
Demand from Russia, the world's leading importer of sugar, has been lack lustre, so many players are discounting it for the meantime, according to dealers.
With the cane harvest in Brazil's key centre-south region coming on full bore, analysts said premiums were barely changed this week and remained soft on the whole.
Differentials for raw sugar from Brazil's centre/south region were seen at 10 to 20 points below the CSCE sugar market for July/August shipment, unchanged from last week's level.
Premiums for ICUMSA 150 sugar for July/August shipment were seen at a $20 to $40 discount to Liffe's August white sugar contract, from a $30 to $40 discount quoted last week.
"It's been steady as she goes," a broker said of the premiums.
Analysts said business has been confined to routine deals done by countries in the Middle East or North Africa. Libya for one is seeking to buy 50,000 tonnes of white sugar soon.
But Iran last week postponed a tender to buy 40,000 tonnes of raw sugar.
"We're still getting dribs and drabs of business," a broker said, adding many consumers may soon take a pause as the harvest in Brazil gathers steam.
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