Singapore — Indonesia's trade ministry could potentially reduce the country's industrial raw sugar import permits for the 2019 marketing year to 2.8 million mt, down 22% from the previous year.
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According to the trade ministry, domestic demand for raw sugar is estimated to be 3.6 million mt in 2019 based on an 8% growth target in the food and beverage industry, while production is projected to be at approximately 800,000 mt.
Acting Director General of Agro-Industry Achmad Sigit Dwiwahjono told local newspapers that the government is currently reviewing domestic demand for and production of raw sugar, which would determine the import licenses to be issued in the year ahead.
Dwiwahjono added that the import licenses would be reviewed semi-annually with 60% of the imports likely to be in the first six months of 2019, and the remainder in the second half of the year. The government has forecast stronger demand for the first six months ahead of the Muslim holy month of Ramadan which falls between May and June.
Indonesia, the largest importer of Thai raw sugar, imported 4.04 million mt from Thailand in 2018, up 63% year on year, Thai Sugar Millers Corporation data showed. Indonesia accounted for 65% of total Thai raw sugar exports in 2018.
The reason for the increase in raw sugar imports from Thailand was that three refineries in Indonesia were out of duty free regime with Brazil in 2018, which provided them with duty free access to raw sugar from Center-South Brazil for the last three years. These refineries would have to pay regular import duty of Indonesian Rupiah 550,000/mt ($38.86/mt) for Brazilian raws, compared with 5% for Thai imports.
Thai HiPol sugar cash values are under pressure, with Indonesia possibly reducing its import licenses. S&P Global Platts assessed Thai HiPol cargoes for loading over March 1-May 15 at New York March No. 11 futures plus 66 points on Wednesday, down 4 points since the beginning of the year.
Adding to the bearishness on Thai raw sugar, Indian raws were heard offered at 20 points over March FOB west coast India, a wide discount to Thai sugar. As a result, Malaysia which typically imports Thai raw sugar, has booked Indian raw sugar cargoes this season.
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However, some traders say this is not going to have a major impact on Thai HiPol cash values this season (October-September) due to expectations of lower production. According to trade sources, sugar production for 2018-19 is expected to be approximately 13 million mt. According to Platts Analytics, 2017-18 production was 14.58 million mttq, a sharp rise from 10.03 million mttq in 2016-17.
"Indonesia has other quotas to import sugar as well other than the industrial licenses so Indonesia may end up importing more even if the industrial license is lower on the year," a market source said.
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