Sugar mills in India are staying away from raw sugar imports, due to negative processing margins and an abundant availability of cane for crushing from local sources.
“Raw sugar imports are currently halted, despite nil duty, due to negative refining margin. Also, domestic yield of cane is enough to feed local consumption,” said Sanjay Tapriya, director - finance, of the Simbhaoli Sugar Mills Ltd.
“Imported raw sugar at the current price will cost nearly Rs 30 a kg, which is below the price of refined sugar. Hence, refining of imported raw sugar makes no logic at all. And, the market is so volatile that nobody knows when prices will move, in which direction. Therefore, it is better for mills not to take any risk at this juncture,” said Sageraj Bariya, an analyst with Angel Broking.
Last year, mills imported raw sugar when refined sugar prices were at a record high of $650 per tonne. By the time they processed it, the price declined to $400-450 per tonne, resulting in huge losses.
Those who’d imported earlier are exceptions. Standalone refiner Shree Renuka Sugars says their plant in Haldia, West Bengal, is operating at full rated capacity. “It has enough raw material in stock for the rest of the quarter, which was imported much earlier,” said Narendra Murakumbi, managing director.
March raw sugar futures on the IntercontinentalExchange rose 0.3 cent to 31.16 cents per lb on news that floods had ravaged this year’s crop in the world’s top producer, Brazil. An export ban by India added to traders’ worries. Experts believe raw sugar may retrace back to 29.58 cents/lb when supply resumes from Brazil.
“Raw sugar prices are lower from the next quarter futures’ contracts because the new Brazil crop starts in April,” said Murakumbi.
London March white sugar settled $1.20 higher at $774.20 on Monday, while May finished $1.60 lower at $738.30 per tonne.
In India, however, sugar prices are trading at Rs 2,700-2,900 per tonne due to the government’s regular intervention to control alarmingly high inflation.
Sugar production in India is estimated to be 24.5 million tonnes, as compared to 18.9 mt in the previous year. With an estimated six-seven mt of carryforward stocks for this season, India can comfortably meet its annual consumption at 23.5 mt.
