Monday, Sep 17, 2007
Jain's comments are significant because ISEC hasn't made any significant raw sugar sales since July 25 when it sold 200,000 tons of raw sugar to Dubai-based refinery Al Khaleej and another 100,000 tons to global trading firm, Cargill.
"Global sugar refineries can't remain idle for long. They need raws which can ideally be sourced from India," said Jain.
He said recent rise in global freight rates will position India as world's most economical supplier of raw sugar to refineries near the Indian Ocean, the Middle East and North Africa.
Jain said for a refinery in the Middle East the current freight rates for Brazilian raws works out to be around $90/ton but Indian shipments cost between $40-$45/ton.
"As global freight costs heat up, future could turn more bleak for buyers," he said.
He said India couldn't have made its strategic shift from being a traditional exporter of white sugar to that of raws at a more suitable time.
White Sugar Premium Over Raws Squeezed
Jain said competitively priced purchases of raw sugar from India will help refineries worldwide shore up their margins when the white sugar premium is getting squeezed.
He said premium of whites over raws has fallen in last few months to barely $60/ton from around $130/ton.
"High freight (costs) and the low premium of white over raws is neutralizing the refining margin of processors," Jain said.
This has made refiners to turn to India, he said.
"Discussions have taken place with refineries in Indonesia for possible trade deals," said Jain.
There are around five major sugar refineries in Indonesia and most haven't covered their requirement of raws in the medium term.
Indian Export Reimbursements WTO Consistent
Jain said the Indian government's freight-related reimbursements for sugar exports are fully compatible with World Trade Organization rules.
India's federal government earlier this year announced freight reimbursements at a flat rate of 1,350 rupees ($33.37) a metric ton to mills for sugar exports effective from April 19. Those mills located away from the coast are to get an additional INR100/ton as an incentive.
However, if exports are delivered by overland routes to neighboring countries, freight reimbursements will equal actual expenditure incurred, up to a maximum of INR1,350/ton or INR1,450/ton, depending on the mill's location.
Australia took up the issue with India's federal government, saying this could distort global sugar trade.
Jain said India is on a firm footing on the issue as its support for mills doesn't violate any international trading norms.
He said, on the contrary, some of the other countries have built-up their sugar industry from scratch on the back of heavy government support and provided large export-oriented assistance to producers.
Sugar Exports To Pakistan Of High Quality
Jain said India's sugar exports to Pakistan are of a very high grade and shouldn't be held back on grounds of quality.
Earlier this month, the Pakistan Sugar Mills Association received an interim stay against the marketing of Indian sugar until the next court hearing.
India recently exported around 4,800 tons of white sugar to Pakistan by land.
Jain said the court should settle the case as soon as possible, or sugar in train wagons could get damaged.
This will discourage Indian sugar mills from further exports to Pakistan, he said.
India has helped Pakistan shore up its domestic sugar supplies in the past to keep local prices under control by sending cargoes quickly, he said.
The latest cargoes of Indian sugar are aimed at keeping a check on Pakistani prices during the Muslim holy month of Ramadan, he added.
-By Sameer Mohindru, Dow Jones Newswires; +91 11 2307 4020; sameer.mohindru@dowjones.com
(END) Dow Jones Newswires
17-09-07 1544GMT
