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The cash premium for Thailand's refined sugar surged to a six-year high this week as near-term supply tightness sent buyers in the Asia Pacific region scrambling for cargoes.

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Platts assessed breakbulk Thai 45ic premium to the front-month London No. 5 sugar contract at $70/mt on September 20, the highest level since August 2011. This was almost 290% higher from the start of the year.

Platts Thai Sugar 45ic Cash Premium Breakbulk

The rise started in mid-July when more cargoes were shipped to Taiwan with a subsequent increase in flows to China as Taiwan replaced Myanmar as the a destination for illegal sugar shipments.

A total of 295,067 mt of Thai white sugar were shipped to Taiwan in the three months to August, according to data released by the Thai Sugar Millers Corporation. This compared with 141,738 mt during the same period to Myanmar.

But as demand from Taiwan became consistent, it was the near-term supply tightness that further supported the cash premium.



"There is a severe lack of availability [of Thai refined sugar]," a trader said.

Another trader agreed.

"There are just not many sellers out there, probably just two or three at the most," he said.

He added that he had not expected premiums to reach these levels so quickly, but since buyers have been paying, he had been raising his offers by $2-3/mt every day.

Such tightness and high cash premiums also saw the majority of Thai millers sitting on their hands as they have committed their cargoes and sold out for the current crop year long ago.

A mill source expressed helplessness against the rising cash premium.

While some expressed doubts on how much longer Thai premiums would be supported at this level when Indian refined sugar was available at a lower price and the imminent deregulation of sugar exports from the European Union, others said that it could go on till Thailand's new crop arrives.

"There is still strong demand for the smuggled route via Taiwan of around 10,000 to 30,000 mt," a third trader said. "Everyone wants some Thai refined sugar."

Others said that so far buyers have been keen for Thai refined sugar than that from other places due to familiarity and the shorter voyage time.

--Daisy Tseng, daisy.tseng@spglobal.com

--Edited by E Shailaja Nair, shailaja.nair@spglobal.com