The Hindu Business Line : South-East Asia may look to India for sugar

INDIA is likely to emerge a major supplier of sugar to South-East Asia in the current season. This follows developments in the international markets resulting in a supply gap in these countries.

According to Mr Narendra Murkumbi, Managing Director, Shree Renuka Sugars, mills could be in a position to export more from the second quarter next year. "The sugar situation currently is tight but offers are coming for Indian sugar. Also, the depreciation of the rupee against the dollar is helping," he said.

According to sugar industry sources, exports have commenced to Singapore and there are enquiries from Indonesia.

"Indonesia requires three lakh tonnes and this month, it is floating a tender to buy 1.5 lakh tonnes," Mr Murkumbi said.

Sugar mills, particularly in the South, are likely to reap the benefit from this market, where there is an enquiry for more than five lakh tonnes. The demand is expected to quadruple in the coming months. More enquiries are coming in and during the season India could export up to 20 lakh tonnes.

This comes as a boon to the millers who are facing significant export obligations, following the import of raw sugar in the last few years. Sugar millers in Tamil Nadu, Karnataka and Andhra Pradesh who imported the bulk of the raw sugar - about 17 lakh tonnes of the total 25 lakh tonnes imported - stand to gain the most, the sources say.

Mr M. Manickam, Managing Director, Sakthi Sugars, said offers for Indian sugar were good and exports had become a viable proposition.

"Currently, there are offers to buy at around $340 a tonne," he said.

Mr Murkumbi said some deals had been done last month at $340 and currently, it ranged between $340 and $348.

Though domestic prices are ruling higher than export offers, mills that had imported raw sugar and had to fulfil export obligations, would not be unhappy with the offers.

"Domestic prices in dollar terms are around $366," Mr Murkumbi said.

According to Mr S.L. Jain, Director-General, Indian Sugar Mills Association, domestic prices varied between $360 and $380 depending on various regions.

However, there is an overall reduction in the volume of white sugar for imports in the international markets.

The reasons are: Thailand, the major exporter to the markets in the rest of South-East Asia, has been hit by drought in the last three years and its production is down by half; and with oil prices ruling high, Brazil, another leading exporter, is diverting its sugarcane for ethanol production.

All this leaves India, which is facing a boom in production, well set to exploit the market, they say. The export price could touch $350 soon with increasing demand, the sources said.

Most mills imported raw sugar during the last couple of years in the $180-220 price band and should find it attractive to export white sugar. For them the breakeven is around $300 a tonne.

"There is a good spread for those who had imported raw sugar," Mr Murkumbi said.

Most imports have happened at about $200 average except for those in the recent months when raw sugar imports happened at more than $250. But with the trend expected to hold even they could export to the South-East Asia, the sources said.

Mr Murkumbi said export obligations extended up to 2007 and February would be the ideal period when mills could look at exports more seriously.

"We are in no hurry since the domestic market is finely balanced. Also, arrivals of the cane have just begun," Mr Murkumbi said.

"Exporters are waiting for the market to improve. The international market is a bit subdued since the European Union is pumping more sugar in the market," Mr Jain said.

Pakistan could also be a buyer towards second half of next year as it is facing a poor crop, Mr Mukumbi said. On the other hand, small consignments are being shipped to neighbouring countries such as Sri Lanka and Bangladesh.

(Additional reporting by M.R. Subramani)

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