Sugar importers want traders to share loss

With no takers for 2,50,000 shipments after prices crashed, traders negotiate to dispose stocks ahead of a likely levy.

Importers of close to 250,000 tonnes refined sugar lying at ports are considering how best to avoid further losses. Since domestic prices have been much below the imported price for about two months and there is no hope of price recovery during the current season, traders are urging bulk consumers to share the loss.

The spot market price is Rs 28,000-29,000 per tonne, while traders had bought at a landed price of Rs 32,000-33,000 per tonne. The imports were mainly from Brazil. Despite the high storage cost, they held the consignment at ports in anticipation of a rise in prices.

However, bulk consumers refused to lift at the imported price after local prices crashed. This was because sugar output projection for the ongoing season was revised to 18.5 million tonnes from 15 million tonnes (at the beginning of the season).

The fall in prices was partly attributed to the government’s measures, including imposing the weekly levy mechanism, which boosted supply and cooled prices.

“We earlier thought the price would remain high throughout the year. Therefore, we booked huge quantities (of imports) at high prices. But, since prices collapsed, we are negotiating with our buyers to share a part of the loss. We will claim the commodity soon,” the head of a trading company said on condition of anonymity.

The sugar output is estimated to rise next year. During the 2011-12 crushing season (October-September), it is estimated at 22.5 million tonnes; it is expected to reach 30 million tonnes next season.

This means prices are likely to remain soft in the coming years, says the official. “In India, the storage cost of sugar is higher than the trade margin. Hence, holding sugar at ports does not make sense any more.”

Many multinationals (MNCs) which actively trade in foodgrain and other agri commodities hold a substantial quantity, say trade sources.

An MNC which imported 15,000 tonnes refined sugar on behalf of a client lifted half the stocks. The company now wants to clear the rest. In India, traders import raw and refined sugar from abroad on behalf of customers.

Since buying remains a trader’s decision, consumers generally default if the price declines dramatically during the period between an import order and the arrival of the consignment at the ports.

Now, there are apprehensions the government may levy 60 per cent import duty on raw and refined sugar. If the commodity is not lifted before the government so decides, docked sugar will also attract duty despite the commodity having been imported during a zero-duty regime.

Hence, importers want to stock the quantity in their own warehouses if bulk consumers do not buy the quantity committed.