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Al Khaleej expects Iran, Iraq sugar shortage

Dubai, August 25, 2009

Developing nations, including Iran and Iraq, may face a sugar shortage as the soaring price of the sweetener puts it out of reach, the chairman of Al Khaleej Sugar, the world's largest sugar refinery, said on Tuesday.

Raw sugar futures have soared to 28-1/2 year highs. The rally since late July came on demand in India, where a weak monsoon decimated the cane crop in the world's top consumer and slow harvesting in Brazil, the leading sugar cane grower and exporter.

"As the price hit all-time highs we are seeing developing nations like Iraq and Iran, who are regular customers, slow down their buying," said Jamal Al Ghurair.

"So for sure, these poorer countries will run out of stock soon since they are not buying and their stocks are running low."     Iraq consumes around 60,000 to 70,000 tonnes of white sugar a month and is not buying enough to meet that level of demand, he said.

"Many of these poorer countries are waiting to see if the sugar price will drop and then buy, but so far it's more or less unchanged."    

Sugar futures edged up on Tuesday, with the sweetener consolidating in a market well supported by expected demand from India and tight global supplies.

ICE October raw sugar futures SBV9 raw were up 0.12 cent to 21.91 cents a lb at 0820 GMT. London October white sugar futures LSUV9 were $1.50 higher at $551.50 per tonne.

Al Ghurair said Al Khaleej was unlikely to begin exporting large quantities to India -- which swung to a net importer from exporter this year after a poor domestic harvest -- given that country's focus on raw sugar.

"We don't see any added value or profit in selling raw sugar. We will wait until India starts importing white sugar, but for sure there is a lot of potential there," Al Ghurair said.

India, the world's top sugar user, consumes about 23 to 24 million tonnes of sugar a year, or about 2 million tonnes a month on average, but demand surges in the festival season that begins this month.

Failed monsoon rains have created a critical situation for crops in India and late-season rainfall will not reverse crop damage, officials have said.

Al Khaleej has kept its pipeline filled, announcing in July that it had bought 250,000 tonnes of raw sugar from Brazil amid global tightening of supply due to a slow harvesting season.

"We have regular shipments that come in from Brazil that were ordered on a long term basis, so we are not worried about supply," said Al Ghurair.

The refinery was still running at nearly full capacity of 5,000 tonnes of white sugar per day, Al Ghurair said.

"In terms of supply, we are not worried because we know at any price we can buy anything," he said, declining to comment about how the company was financing its operations.

Al Khaleej is one of the bidders on a tender to supply Pakistan with 75,000 tonnes of sugar, said Al Ghurair. Tender results were due on Sept. 29.

Al Ghurair declined to comment on other export deals in the pipeline. -Reuters




Tags: Iran | Sugar | Al Khaleej | crop |

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