April 5, 2021
S & P Global Platts | https://bit.ly/2PUpNgK
The average cash premium bid across the 13 trading houses that participated in Thailand's second Quota B tender for the 2021-22 season on April 3 edged higher at 101 points over the New York No. 11 March 2022 contract, compared with 92 points in the previous tender.
Louis Dreyfus secured the winning bid at a 135 points premium to the New York No. 11 March contract, according to a tender report seen by S&P Global Platts.
Trade sources said the weakness in futures prices would have lowered the outright price, thus providing support to the Thai cash premiums in the tender. The international raw sugar NY No. 11 March 2022 futures price closed at 14.96 cents/lb on April 1, shedding almost 5% since the beginning of March.
"Thai mills saw futures at 16 cents/lb before the first tender, so there is no rush for them to chase the market lower," a Thailand-based source said.
Another market source said it would also be risky to tell if Indian government sugar export subsidies would continue to be available in the next marketing season, which was another factor for Thai cash premiums to be supported.
"If you sell today and hope that Indian sugar is there, we will need to hold our short [position] till November and December. With a low flat price environment, we are not sure if India will continue to be there. It would be a gamble right now," a Hong Kong-based trader said.
Demand is key
Weak regional demand from destination buyers could have an influence on the outlook for Thai cash premiums, as they would not be in a rush to overpay for this tender, traders said.
Demand for Thai sugar has taken a hit when Vietnam announced plans to impose an antidumping duty of 33.88% on Thai raws and 48.88% on Thai refined sugar on Feb. 10.
Although the Vietnamese government would be reviewing the antidumping policy for 120 days after the announcement date, many traders remained pessimistic.
Uncertainty in freight, Thai production
Even as it remains unclear on how the freight situation would pan out for the next season, market sources said the current volatility in freight spreads has made it challenging to price Brazilian sugar into key import markets like Indonesia as far out as March 2022.
The average first quarter 2021 freight spread between 50,000 mt South Brazil-Indonesia and 25,000 mt Thai-Indonesia was at $23.09/mt, wider almost 30% year on year from the same period in Q1 2020, according to Platts data. Moreover, the freight spread reached a year-to-date peak of $30.80/mt on Feb. 25.
"Brazil to Indonesia freight has climbed up more than Thai's, and I believe freight spread could probably still be substantial for next year...it might be difficult for Brazil [sugar] to be priced into Indonesia next year," a raw sugar trader told Platts.
Thai 2021-22 sugar production recovery estimates remain in a wide range of 10 million-11 million mt, up 35% from the current season, according to S&P Global Platts Analytics.
While it is difficult for Thai sugar to regain market share in Indonesia, the production in the upper end of the range would likely suppress Thai HiPol raw sugar premiums for a sustained period for Indonesian demand to be amply captured.