Indonesian news bolsters Thai sugar premiums

Indonesian news bolsters Thai sugar premiums

BANGKOK (Reuters): News that Indonesia is expected to hold a tender soon to buy 500,000 tons of raw sugar and 200,000 tons of whites underpinned Thai sugar premiums in an otherwise dull market, trade sources said yesterday.

But the impact of the news was not strong enough to push prices up as traders said sugar from Brazil and Australia also stood a good chance of being bought in the tender, details of which are yet to be released.

"The news helped underpin premiums which could otherwise have fallen without the fresh lead. We expect more details in two weeks... It did not boost premiums much because basically, the sugar market needs much more world demand," a Singapore trader said.

"Moreover, Thailand might not be the only viable origin. It has a freight advantage, no doubt. But Brazil and Australia will surely price their products very aggressively," he said.

Thailand is believed to hold a sizable amount of raw sugar in warehouses while it has only small amount of white sugar left for sales.

"If the price is right, then there are incentives to remelt raw sugar to produce whites. But I doubt if that will be the case," said an executive from a major Japanese trading firm.

Some traders treated the news of possible purchase of 500,000 tons of raw sugar by Indonesia with skepticism because Jakarta is known to be a white sugar buyer as it lacks adequate refining facilities.

"Actually, I'm surprised. What will Indonesia do with such amounts of sugar? Could it be that the government is going one step further in saving money by encouraging people to use raw sugar which is cheaper?" said an executive at one mill.

The Philippines was absent in the Thai sugar market. Traders said they doubted if the country, which announced it would soon buy raw sugar, would opt for Thai origin sugar as first choice.

"The Philippines normally goes for high pol sugar. Thailand produces 98 degrees pol sugar which is alright. But its raw sugar has been left in warehouses for months now and the degrees of polarization have dropped," another trader said.

"Now it is the season in Australia and the country also produces very high pol sugar," he said.

Thai raw premiums for July/September were quoted at 100/120 points per pound over New York's Coffee Sugar and Cocoa Exchange. January/March was offered at 90 points per pound over CSCE.

White premiums for nearby shipments were barely changed at US$15 per ton over London.