Sugar seen spurting on expectations of China imports

Domestic sugar prices are seen rising on expectations of Chinese imports, brokerage Anand Rathi Securities said in a report Monday.

The market has been abuzz with such talk, it said. Some traders expect spot prices to rise as high as Rs 1,900 per 100 kg, up Rs 50 from current levels.

Traders said, a cut in sugarcane output in the fourth advance estimates by the government is also seen as a positive for the physical and futures prices.

The government has cut the sugarcane output estimate for crop year 2004-05 to 232.30 million tonne, down 1.80 million tonne from the third estimate.

According to the Anand Rathi report, Pakistan has decided to up sugar imports, faced with higher domestic prices.

Pakistan will require around 300,000-400,000 tonne of sugar in the next few months to meet the demand during 'Ramadan,' the holy fasting period, in October.

Pakistan has already received around 190,000 tonne of sugar, the report said.

Initially there was talk that Pakistan would procure the required quantity from India due to the close proximity of Indian sugar belts.

But the imports did not materialise.

Instead, Pakistan bought sugar from China at around $325 per tonne, far higher than the current price of around $300 on London International Financial Futures Exchange (LIFFE).

However, according to the Anand Rathi report, China itself is facing a deficit and may import sugar from India.

If these imports do take place, then the domestic sugar prices are expected to gain sharply.

But the talk of imports from China is only speculative in nature and may in fact not take place at all, said Mumbai-based trader C Sanghvi.

Also, he said, the imports might not really impact the domestic spot prices because July-October is generally a lean season.

He sees the current domestic demand comfortably met through the release of government quota till October.