LONDON: Brazilian raw sugar exporters to Indonesia risk losing substantial market share to Thai suppliers who benefit from a favourable regional trade regime, European trade sources said on Thursday.
Brazil is the world’s top raw sugar producer and exporter. Indonesia is the second biggest raw sugar importer after China. Indonesian refineries use raw sugar from regional origins such as Thailand and Australia, but have also used imports from Brazil, in part due to availability when Thai supplies have been tight.
“A lot of the Brazilian flow to Indonesia will be curtailed because the Thais are getting a duty advantage into Indonesia,” one London-based trade source familiar with the Indonesian raw sugar market said.
Another European trade source said he expected Brazilian exporters to sell little raw sugar to Indonesia in the coming months because of the Thais’ advantage in the import duty and their willingness to lock in the latest rally in prices.
Raw sugar futures hit a 9-month peak this week on growing sentiment that the global market was shifting into deficit after years of surpluses. Another London-based trade source said he expected Thai exports to Indonesia to increase in the first quarter of 2016 compared with a year ago.
Thai exporters benefit from a reduced 5 percent ASEAN (Association of Southeast Asian Nations) raw sugar import duty into Indonesia in 2015 and 2016, down from 10 percent in 2014, 15 percent in 2013 and 20 percent in 2012. The import duty to Indonesia paid by Brazilian and other non-ASEAN exporters was 550 rupiah per kg, equivalent to a duty of around 10 percent — double the ASEAN duty.
Confusion among Indonesian refiners over the status of sugar under the ASEAN trade rules, combined with a slower rate of exports from Thailand over the past couple of seasons due to disappointment with weak sugar prices, had created a window of opportunity for Brazilian exporters over the last two years.
Thai raw sugar exports to Indonesia fell to 2.0 million tonnes in January-July 2015, from 2.6 million tonnes in the same year-ago period, according to the London-based International Sugar Organization (ISO). In 2014, Thai raw sugar exports to Indonesia were 1.485 million tonnes, compared with 427,000 tonnes of Brazilian raw sugar to Indonesia.
