Sugar Industry News : November 2015
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The world price certainly seems to be on the rebound : it was 10.71 on September 1 but was 13.26 on October 1 and 15.11 on November 1. That can be seen on the graph which also plots the Brazilian real to show that it too is showing signs of recovery :
Rabobank is predicting that there will be a 4.8 million ton global deficit for the year just started. On the other hand, there are reports that the rise is only due to traders betting and that the physical market is missing so physical sugar is being offered at a discount to the world price … strange.
ASR AWARDED $27 MILLION AGAINST T&L
It is now 5 years since American Sugar Refining purchased the remaining sugar operations of Tate and Lyle for about $320 million. By about 2012, ASR was suing T&L because the raw sugar supply into the EU was far from stable. Last month, London’s Commercial Court awarded ASR something less than 50% of the amount that it claimed : about £18 million of the £40 million total.
DURRAH REFINERY MAY PROCEED
The Durrah Refinery project in Yanbu on Saudi Arabia’s Red Sea coast to the north of Jeddah might actually be proceeding. In May we reported that Wilmar might become an investor but then we heard that that was not to be. The next rumour, heard early last month, was that LDC would become an investor but then that too was quashed and Wilmar’s name was again put into the frame. It is understood that a contract has been signed with a contractor so maybe it will become a live project.
KWALE SUGAR TO EXPORT 10 MW
Kwale sugar, down on Kenya’s coast about 60 km south of Mombasa, is reported to have signed a 20 year PPA to supply 10 MW to Kenya Power. The price is apparently US$100 per MWh. The factory was supposed to be complete much earlier this year [ignoring earlier dates that were announced] but we have nothing about its completion. It must be a risky strategy to have a PPA in place from the very start of commissioning : let’s hope that the penalties are not too stringent.
MUMIAS REPORTS $45 MILLION LOSS
Mumias Sugar, which should be the flagship of the Kenyan industry, has reported a $45 million loss for the year ending June 2015, 70% worse than the 2014 loss. The company is blaming the factory closure for 10 weeks and a lack of cash for spare parts. However, part of the reason must clearly be the marked drop in cane crushed from 1.9 million tons in y/e 2014 to only 1.1 million in y/e 2015
TANZANIA OFFERS 40 000 HA FOR SUGARCANE
The Tanzanian government has come out to tender for two 20 000 ‘farms’ designated for sugarcane at Mkulazi, about 60 km to the west of Dar es Salaam. As with the Bagamoyo project, the most likely issue will be land ownership, even though all land belongs to the state. The Tanzania Investment Centre is claiming that it has legal rights but that is not the same as having squatter-free land.
The Bagamoyo project, which we last reported on in mid-2013 but actually dates from 2008, still seems to be in trouble with the Swedish development agency having pulled out and land rights still being disputed, never mind the water rights which could mean nothing if the Kilombero land drew more water.
SALIMA SUGAR ALMOST COMPLETE
It is reported that the Salima sugar factory in Malawi, some 75 km east of Lilongwe, is almost complete which means that it should be able to commission on some cane before the end of crop, ready for a full start next crop. It is a 1250 tcd factory funded by India’s Exim Bank and is presumably a typical Indian cooperative factory, perhaps making plantation white. Illovo’s Nchalo and Dwangwa operations shouldn’t have too much to worry about
The current drought conditions are not limited to South Africa : Illovo’s Ubombo is stating that it cannot irrigate its fields as the Great Usuthu river is at an all-time low. Mhlume and Simunye are unlikely to be in a better position and may be worse as Simunye has already stretched its limited water across larger land areas by adopting drip irrigation in places.
INDIA INTRODUCES COMPULSORY EXPORTS
The Indian government introduced compulsory exports last month in an attempt to reduce its ~10 million ton stocks to less than 6 million. The problem is the world price which has led to the millers refusing to export without incentives, something which would mean again breaking WTO rules. Traders seem to think that, at best, 1.8 million tons will be exported but if the crop suddenly collapses – as has happened in the past – then we could see India importing again.
INDONESIA SEEKS TO SMOOTH IMPORTS
The government of President Joko Widodo, elected in mid-2014, seems to be wavering on many fronts including the control of the sugar industry. Last year it drastically curtailed raw sugar imports as it tried to encourage the domestic cane industry but that industry is in such bad shape [would accept cane with a purity of as little as 65%?] that it will take at least a decade to turn round. It is now saying that it will ensure that raws is imported as required to ensure local supply. It expects to need over 3 million tons this year.
VIETNAM SUGAR IN CRISIS
Reports are emerging of a large-scale swing away from sugarcane by Vietnamese farmers. The most drastic seems to be in Tay Ninh province to the north of HCMC which has the largest capacity of any province because of Tay Ninh Sugar. The three factories have a combined crush of 15000 tcd but the farmers are so disillusioned that the next crop is expected to be 50% down on the last.
PRODUCTION IN CHINA FALLING BELOW THAILAND
There seems to be a consensus around the world that China’s output will fall by as much as 1.5 million tons in the current year. Although El Niño is cited as part of the reason, the rising cost of labour seems to be the main issue so one may well see the mechanisation of harvesting as the next step in the development of the country’s industry. In the meantime record imports are expected this year with the USDA forecasting levels as high as 5.5 million tons.
AUSTRALIA GAINS IN FINAL TPP AGREEMENT
The Trans-Pacific Partnership negotiations are finally complete so the world has its newest free-trade agreement. Australia seems disappointed with its increased access to the US market but it has gained. As we understand it – and we stand to be corrected if anybody wants to read the full text released in early November – Australia has an extra 65 000 tons of US quota but, perhaps more importantly, it has 23% of the discretionary quota which is used to finalise the imports for the year based on domestic demand.
A note of warning : the agreement has not passed into law in any country and there is vociferous opposition in some quarters.
POTENTIAL FOR CHANGE AT THE ASMC
John Pratt from Wilmar is taking over from Quinton Hildebrand as chairman of the Australian Sugar Milling Council which could lead to some interesting developments as Hildebrand was a staunch supporter of QSL whereas it was Pratt that took Wilmar out of QSL, thus triggering the other departures.
SECOND US MEXICO TRADE WAR OFFICIALLY OVER
Last month we updated you on the concluding discussions within the US on the Mexican subsidies on sugar, something not allowed under NAFTA. Last month the US International Trade Commission [part of the Department of Commerce] voted unanimously that the import restrictions introduced at the end of 2014 were legal and would protect the US industry from any such subsidies. The net result is that the restrictions will stay in place until at least the end of 2019.
YONKERS TECHNICAL PROBLEM
ASR has experienced some unspecified technical problem at the Yonkers refinery that is expected to last ‘well into November’. The issue was first reported in early mid-October and has caused the company to ask customers to either accept lower quality sugar [whatever that means] or accept delays in delivery. With Brooklyn now long closed, it will be more difficult to supply the north-east than would otherwise be the case.
JAMAICAN INDUSTRY STRUGGLES II
In September we reported on the Jamaican industry as a whole, emphasising Duckenfield to some extent. Last month the Jamaica Public Service forced the closure of Long Pond by simply cutting off the electricity supply because the company had not paid for the electricity used [it is off-crop]. The Hussey family, the owners who invested a lot in the almost defunct factory just a few years ago, is apparently thinking of just running the Hampden distillery.