Sugar Industry News : March 2015
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WORLD PRICE
Now that March has closed we are looking at May and that price was down to 13.64 ¢/lb on the first trading day of March. You have to move a full 12 months into the future to find a price above 15 ¢/lb and yet all of the talk is of the world moving into deficit, not so much because of drought or excess rainfall but just because of the depressed price. Is the market calling it right or not?
1 MILLION TONS OF PHYSICAL AS MARCH CLOSES
When October sugar closed last year it transpired that Bunge had taken about 500 000 tons of physicals in a cunning purchase right at the bottom of the market. This time, as March closed, about a million tons was taken by Sucden [52%] and ED&F Man [48%]. What is not so clear though is whether those too were cunning purchases or the result of wrong calls. Time will tell.
HELLENIC SUGAR FOLLOW-UP
We briefly touched on Hellenic Sugar’s woes last month. In February the company announced its results for the second half-year : the half year net loss increased from a loss of €14 million in the same period last year to a loss of nearly €40 million this time and net cash at the end of 2014 was only €2.3 million compared to €18.5 at the end of 2013.
ZAMBIA SUGAR’S FINANCIAL STRUCTURE
An international charity is accusing Illovo – and hence AB Sugar – of avoiding Zambian tax by various means. It reports that the immediate owner of Zambia Sugar is a Dutch cooperative which in turn is owned by companies in Jersey and Mauritius and that an Irish shell company sells services to Zambia Sugar. One suspects that all is above board and that the arrangements are typical of the structures used by many large corporates throughout the world.
SOUTH AFRICAN DROUGHT
Further to last month’s article on the drought in KZN, the South African Cane Growers’ Association has put a value of ZAR 920 million [US$81 million] on the cost of the drought to the sugar industry.
STRIKE IMPACT IN MAURITIUS
The nonsensical strike last November seems to have cost the Mauritian industry about 15 000 tons of sugar production, judging by the latest estimate of 400 000 tons of production. The crop normally ends in December on the island but because of the strike the mills were still crushing in January when the rains arrived.
Alteo, the largest of the island’s sugar companies appears to be 17.5% down on sugar profits, only being buoyed by the disposal of a non-sugar asset.
TWO NEW REFINERIES IN SAUDI ARABIA?
We have been quietly tracking two new potential refinery projects on the west coast of Saudi Arabia, half expecting neither to proceed and allowing that one might do so. Last month though, it started to look as if both will proceed.
The one, now called Al Reef Sugar [al reef means ‘countryside’ in Arabic], is to be established in Jizan – sometimes spelt Jazan – in the far south of KSA’s Red Sea coast about 60 km from the border with Yemen. Its promoter is the AK Saeed group and it is capitalised at $80 million and the government has generous grants available for investment in Jizan. It is reported that Shree Basaveshwar Sugars will build the refinery but, as far as we can tell, that is a company valued at $240,000 with one sugar factory possibly still being built in the north of India’s Karnataka state.
The other, now called Durrah Sugar [a durrah is a pearl], is to be built in the industrial area to the south of Yanbu so about 300 km north of Jeddah and the Savola refinery there. Contract award for what is expected to be a 2500 t/d refinery is expected in the near future.
ETIHAD REFINERY INAUGURATED
Although not mentioned by name, we think that the 3 000 t/d sugar factory inaugurated in Hilla, about 90 km south of Bagdad, last month by the Iraqi Prime Minister is actually the 3 000 t/d refinery of Etihad Sugar [Etihad means unity in Arabic and is not just the name of an airline] and not a beet factory slicing 3 000 tbd.
INDIAN CANE VARIETIES
The report of paper presented last month at the South Indian Sugarcane and Sugar Technologists’ Association meeting was rather alarming. The head of the Coimbatore Sugarcane Breeding Institute urged the industry to move on from having only three main varieties being grown. Apparently they were released 15 years ago too : how much more vulnerable can you get?
KANTHALAI TO RE-OPEN
The government of Sri Lanka has been trying to re-start the sugar factory at Kanthalai in the north east of the island ever since the war with the Tamil Tigers came to an end. The problem is that the factory is derelict [it hasn’t run for the last 22 years] and very small and the cane fields look more like the African veldt. Nonetheless, the government has announced that it is ‘granting’ 49% of the equity to an unnamed investor. No doubt the investor will be the one to inject fresh capital though.
PHILIPPINES CROP FORECAST
The Sugar Regulatory Administration of the Philippines has warned that this season’s crop will be lower than normal due to rain at the start of crop and a shortage of labour but it looks as if we are only talking about a few percent down. On the other hand should it be seen as a signal for the start of major reforms to the industry to make it more efficient?
AUSTRALIA REVIEW
Although the crop looks to be on course for a typical year, the Maryborough crop will be the smallest in two decades as a result of the drought experienced in the region and a new pathology issue – ‘Yellow Canopy Syndrome’ – is also giving concern. Set again that, however, the Queensland industry is reporting 14 tons of commercial sugar per hundred tons of cane.
Stress in the industry continues to show however : in February farmers supplying Mackay Sugar’s three factories tried to oust the two ‘grower directors’ on the company board but failed. The issue seems to be the reliability of the milling plant which disrupted [one hesitates to say ‘severely’] the recent crop. The company points to its limited resources.
NSW SUGAR COOPERATIVE IN TROUBLE?
NSW Sugar which owns the three factories in the north of New South Wales [Condong, Broadwater and Harwood] is planning to sell half of itself to a flour company called Manildra. That company already owns 50% of the joint venture refinery at Harwood. The talk is of very hard trading conditions with now foreign owned sugar companies in Queensland.
CHALLENGE TO US MEXICO TRADE DEAL
Imperial Sugar and AmCane Sugar are challenging the sugar deal that was agreed between the USA and Mexico last year in hearings by the US International Trade Commission that are required before the deal can be ratified. What would be significant, however, would be if ASR challenged it. So far there has been no mention of that.
US SUGAR REFORM ACT
The US Sugar Reform Act which seeks to end the controversial Sugar Program [which is not to say that the Reform Act is not controversial too] was again introduced to the Senate in February. It failed last time but this time, who knows. The current program runs until 2017. Now why does that year ring a strong bell?
BRAZIL COMPANY RESULTS
In mid-2011 the Brazilian real hit 1.55 to the dollar, a very strong currency indeed. However, luckily for the sugar companies, it has gone from a quite steady 2.2 to the dollar down to 3 to the dollar over the last six months or so. The sugar company results being announced in February were all sounding very buoyant – in reais terms.