Sugar Industry News : October 2015
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WORLD PRICE
The world price had recovered to above 12 ¢/lb when the October market closed on the last day of September and March, the next forward market, was 12.88 so things were looking up. In fact, March closed at 13.26 the next day so maybe we are finally seeing an end to this depressing bottom. Wilmar is reported to have taken another million tons as the market closed.
ABF PREDICTS EU PRICE RECOVERY
ABF, the mother company of British Sugar and hence Illovo and others, is telling its shareholders that it expects the EU internal price to recover from its current lows. The EU has seen the internal price drop from € 730 per ton in May 2013 to € 570 a year later and to only € 417 in May this year. ABF points out that stocks, which were relatively large, are now back to historic norms. It also expects the 2017 regime change to start having an impact soon, presumably as a million tons of refining capacity is shut down.
CAMPAIGN STARTS IN GERMANY
As the German beet campaign started last month the country’s sugar association announced that a significantly smaller crop was expected following last year’s exceptionally high one. Average beet yields are forecast to be only 90% of last year at just under 70 t/ha but, more importantly, only 289 000 ha were planted – about 81% of last year’s land area. Sucrose content is expected to be the same as last year so the crop will only be 74% of last year’s.
TARDA PROJECT RESURRECTED AGAIN
Kenya’s Tana river project down near the coast about 200 km north of Mombasa is being resurrected by the local development authority. Back in 2012 this was going to be a major development by Mumias expected to cost US$ 400 million but clearly with the state of Mumias’ finances that is not going to happen so the authority is expecting to advertise the project internationally early next year. It claims that the cane will mature in 9 months ‘because of the wet humid climate’. Sounds like a good climate for fungal growth.
SOUTH AFRICAN DROUGHT CONTINUES
South Africa’s KwaZulu-Natal, essentially a rain-fed area, is reporting a 34% reduction in crop as a result of the drought which has persisted in the country for ten months now. Sugar production in the current crop is expected to be only about 1.7 million tons for the whole country. In the eight years from 2006 to 2013 the average production was 2.1 million tons.
INDIA MAKES EXPORTING EASIER
India has announced a reduction in the administration needed for its sugar companies to export because this year the domestic consumption is expected to be just under 25 million tons but production is expected to be 28 million. Closing stocks should be about 10 million tons but in the scheme of things that is only 5 months consumption so the country shouldn’t get too worried : it wasn’t that long ago that we saw production slump more than 10 million tons from one year to the next. Next year is already predicted to be down 1 million tons based on the poor monsoon this year.
UP GOVERNMENT THREATENS MILLERS
The UP government, ignoring the federal regime and overpricing cane, is faced with mills refusing to start up and hence lose even more money. It has therefore threatened to take over any such mills and run them itself ‘in the interest of the farmers and the state’. There should be some interesting court cases if that happens.
ANOTHER REFINERY FOR RUSSIAN FAR EAST?
The administration of the Khabarovsk region of Russia is reported to have signed an MoU for the construction of a 1500 t/d RSO refinery in Sovetskaya Gavan, a port about 850 km north east of Vladivostok. As the mean temperature doesn’t get above freezing point for 5 months of the year the refinery’s condensing requirements shouldn’t be too difficult to satisfy.
FIJI SEEKS INDIAN FUNDING FOR EXPORT COGENERATION
FSC has been discussing $ 152 million in Indian funding towards its reportedly $217 million ‘cogeneration’ project at its Rarawai factory on the north of Viti Levu, the main island. One suspects that the project, previously reported to be a 45 MW station, is actually an electrical export station as it doesn’t make sense to export only during the approximately 200 day crop.
Output at Rarawai is very variable, having gone from ~30 000 tons in 2010 to nearly double that in 2011 before falling back to 45 000 tons in 2012 and up again to 60 000 in 2013. At 10 tcts it seems that it can crush about 600 000 tons per year so about 3 000 tcd. Where does the 45 MW come from? Clearly not just bagasse.
SECOND US MEXICO TRADE WAR NEGOTIATIONS
Yes, it is about 12 months since the agreement between Mexico and the US over sugar imports but the US Department of Commerce has continued with its investigation. Last month it announced its final conclusions which were that Mexico had been dumping at margins of 40 to 42 % below the value of the exported sugar and had subsidized various parts of the industry from 6 to 44 %. The only outstanding point now is whether US companies were harmed by this. The vote is due later this month.
MEXICAN GOVERNMENT TRIES TO PRIVATISE AGAIN
When nobody bid for the last five government owned factories earlier this year, it was assumed that they would stay in government hands but no, last month the privatisation process started again. Four of the factories are in coastal Veracruz state and the other is in San Luis Potosí state, further north and west of Veracruz.
ONE VOICE PREDICTS GREAT THINGS FOR CUBA
A representative of Platts [the owner of Kingsman] has been quoted as saying that Cuba could reach production of 2.5 or even 3 million tons by 2020. That is bold crystal ball gazing given the short time since Cuba started to turn around [the year soon ending saw an 11 year high of 1.9 million tons] but even if it does, will people buy the quality of sugar that the island produces? It needs to substantially improve its quality as well as its quantity.
GRUPO GLORIA CONTINUES TO GROW
Peru’s Grupo Gloria, owner of six factories in that country [including Casa Grande and Cartavio], La Troncal in Ecuador and San Isidro in Argentina, has announced that it intends to build another factory in Peru. Earlier this year it acquired the Maple Energy ethanol factory in the far north of the country.
This new factory will be in Olmos, Lambayeque Province and is reported to be costing $150 million. It is expected to start crushing in mid-2016. Interestingly, Lambayeque is where Maple was originally going to build its factory.
SHREE RENUKA DO BRASIL BANKRUPT
It is only 12 months or since Wilmar took control of India’s Shree Renuka and hence inherited control of Renuka’s disastrous investment in Brazil. Last month the plug was pulled on that Brazilian operation which filed for the equivalent of Chapter 11.
The numbers do not make good reading. A year ago the group’s shares were INR 16 which was reported to be a 52 week low with a drop of 45% in three months. After the bankruptcy announcement they dropped to just INR 7.3. If you combine the 2013/14 results with the 2014/15 ones [the group year ends on March 31] the group made a loss of about INR 33 billion – a mere US$ 500 million.
DEDINI ENTERS CHAPTER 11
Brazil’s Dedini, a mixture of an engineering company and a sugar producer, has entered the equivalent of Chapter 11 but it only has until November to come up with a plan to avoid bankruptcy. It is reported to have R 1.15 billion of debt [about US$300 million], three quarters of which is tax and other government contributions which is not covered by Brazil’s ‘Chapter 11’ provisions.
CARGILL BUYS TWO BANKRUPT FACTORIES IN BRAZIL
Cargill is reported to have purchased Ruette Agroindustrial, owner of two factories in Brazil. Although Cargill’s sugar division seems to have been fully merged into Alvean, its jv with Copersucar, the purchased is reportedly by Cargill’s Black River Asset Management and not by Alvean.
SPLENDA BUSINESS SOLD
Johnson and Johnson, Tate and Lyle’s partner in the development of sucralose and owner of the marketing rights of Splenda has announced that it has sold that business to a US group called Heartland Food Products. We don’t think that this is the same Heartland which went by the name of Heartland By-Products that was importing sugar doped molasses into the US some 20 years ago.