LONDON/MUMBAI Flows of Indian white sugar to Myanmar, a gateway for smuggling into China, are slowing down, while Brazilian sugar is becoming more competitive due to cheaper freight.
Volumes of white sugar shipped to Myanmar soared last year and early this year due to a jump in smuggling into China because of high domestic prices in the world's top sugar buyer.
Up to one million tonnes of sugar is trafficked into China every year, a Chinese agriculture ministry official said earlier this month.
Dealers said the bulk of the smuggled white sugar came from India and Thailand, with far-away Brazil supplying a much lower share.
But persistently high domestic Indian sugar prices, around $30 per tonne above world prices, are now reducing incentives to ship low quality Indian whites to Myanmar.
"Mills are getting higher prices in the local market," said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association (BSMA).
“They are reluctant to sell at a discount in the world market as they know production (in India) would be lower this year and next year due to drought.”
A European trade source said a drop in Indian exports could provide an opportunity for sellers of Brazilian sugar.
"This is creating room for Brazilian low quality whites in Myanmar as freight rates have on average fallen by at least 35-40 percent over the last five to six months," the source said.
He said it was likely delivered Brazilian low quality whites to the Chinese border region were at least $10-11 per tonne cheaper than Indian supplies.
A second European trade source said a shipment of 45,000 tonnes left Brazil for Myanmar in January.
Dealers said they expected large flows of white sugar to continue to be shipped to Myanmar while Chinese domestic prices remained at a high premium to world prices, but noted that Chinese prices had eased after the Lunar New Year.
"I do not expect the flow to abate very soon – as long as the domestic Chinese prices are attractive," the second European trade source said.
Indian Sugar Mills Association President Tarun Sawhney told a conference in Dubai earlier this month that of 1 million tonnes already contracted for export from India much was destined for Myanmar where the sugar was expected to be smuggled into China.
Indian traders said exports of Indian refined sugar to Myanmar, which had been processed from Brazilian raw sugar imported to Indian coastal refineries, were steady.
The European trade source said Brazilian low quality whites might also start to be shipped to Asia on bulkers or cargo ships, rather than in containers.
(Reporting by David Brough and Rajendra Jadhav; Editing by Susanna Twidale)
This story has not been edited by Firstpost staff and is generated by auto-feed.
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Updated Date: Feb 20, 2016 00:00:16 IST