Indonesia sugar demand eyed, China reopens

October 08, 2012 at 10:12 AM

SINGAPORE: Sugar demand from Indonesia, Southeast Asia's largest consumer, could lift Thai raw premiums despite the approaching crushing season, while export cuts by main rubber producers could propel Tokyo futures to a new high, dealers said on Monday.


Among other soft commodities, year-end demand will help keep butter ratios firm in Asia, but coffee differentials in top robusta producer Vietnam could widen as fresh beans are expected to enter the physical market later this month.


Thai raw sugar premiums could trade in a range of 70 to 90 points to New York's March contract this week, with buyers in Indonesia likely to make fresh inquiries. The next Thai crushing season is due to start in October or November.


"With flat production growth and steadily rising consumption, Indonesia's sugar market is increasingly turning to imports to fill its growing deficit," said Tom McNeill, director of Green Pool, a commodities analyst in Brisbane.


"Sugar consumption has risen from about 4.15 million metric tons in 2005 to 5.35 million metric tonnes in 2012."


Indonesia usually buys about 2 million tonnes of raw sugar a year, mostly from Thailand, and recently issued import permits for 250,000 tonnes of raw sugar. "Consumption growth has been driven by growing demand from the food and beverage industry, an increase in incomes and population growth of 1.4 percent annually," said McNeill.


"Direct human consumption accounts for around 50 percent of total consumption, while the food and beverage industry uses the balance."


Tokyo rubber futures, which set the tone for physical prices, were closed on Monday for a holiday but the global benchmark could to find support at 260 yen a kg, having rallied to their highest since late May at 275.5 yen last week.


Thailand, Indonesia and Malaysia have set up a support mechanism to intervene if rubber prices fall below $2.70 per kg after agreeing in August to trim exports by 300,000 tonnes from October to shore up prices hit by a faltering global economy.


"I think we will trade in a range of 260 to 280 yen, and I would think China will return to buy to support the market," said a dealer in Kuala Lumpur.


Markets in China, the world's largest rubber consumer, reopened on Monday after a week-long holiday. China imported 1.37 million tonnes of natural rubber in the January-August period, up 13.74 percent year on year.