Asia Sugar Trade houses
Thai high-polarisation, or hipol, raw sugar for March 2012 was offered at premiums of 60 to 70 points above New York's March contract, steady with last week, with a few deals reported.
"A lot of deals are for next year's shipments. There are trading houses which are willing to take risks on the view the market will be short," said a physical dealer in Singapore.
"I am not sure about prompt shipment. Ramadan is coming and trading should have intensified, but it hasn't. It's really depressed at the moment. Everyone is just a adopting a wait-and-see approach."
The one-month Muslim fasting month, which culminates with the Ed al-Fitr festival, is expected to start in August, when demand for sugar usually increases in countries such as Indonesia, India and Pakistan.
But dealers said demand for nearby shipment was dampened by rising prices for futures as well as high premiums for raw sugar from Thailand, the world's second-largest exporter after Brazil.
"Well, the sharp futures rally has caught most by surprise, and so those buying physical sugar don't want to pay high physical premiums as well," said a regional dealer.
"The white sugar supply also appears to be increasing, and the very high white premiums are now falling that is helping physical buyers but the sharp rally in raws futures will slow off-take for a while."
Thai raws for nearby shipment were steady at premiums of 210 to 250 points above New York's July contract, their highest since March, with a small quantity traded at 190- to 200-point premiums.
Premiums for Thai white sugar were offered at between $30 and $40 above London's August contract versus as high as $65 last week.
"I do see offers on the inter-trade at around $35 to $40, but still not enough to entice destination buyers to move," said the dealer in Singapore.
"Still there will be a lot of hand-to-mouth buying rather than buying in advance. It's very technical now in terms of futures pricing, detached from the fundamentals."
London's August white sugar futures went up $12 to close at $739.60 per tonne on Monday, having set a three-month top for the spot contract at $741.40.
New York's July raw sugar contract climbed 1.10 cents or 4.2 percent to finish at 27.47 cents per lb, the highest settlement close since April 5 and after having touched a session top at 27.58 cents.
Dry weather is trimming sugar output from Brazil, a development that should support futures prices and could prompt some mills to cancel delivery contracts, analysts at Datagro said.
Dealers hope that Ramadan-linked demand would help stir up trade for nearby delivery next week, although more gains in futures could also encourage consumers to stay on the sidelines.
Copyright Reuters, 2011