New white sugar contract could become benchmark - trade

By David Brough

LONDON (Reuters) - A new containerised white sugar contract to launch on ICE Futures Europe next month has a good chance to succeed and may eventually lead to the demise of the existing breakbulk contract, traders said on Thursday.

"There is only space in the market place for one (white sugar futures) contract," one senior trader said.

ICE Futures Europe said on Wednesday it plans to launch a containerised white sugar futures contract on June 20 with the first listed contract to be October 2016.

Traders estimate about 75 percent of the global white sugar trade is carried in ship containers, a share which is likely to increase.

A second trader said the new contract would be inexpensive to operate and should get a boost when the European Union dismantles sugar production quotas in 2017.

The ending of quotas is expected to boost containerised sugar trade and delivery points for the new contract include Le Havre in France, Antwerp in Belgium, Rotterdam in the Netherlands, Hamburg in Germany, Gdynia-Gdansk in Poland and Felixstowe in Britain.

"The EU used to dominate the whites contract, and there's a good chance it could do so again," the second trader said.

Traders said global trade was moving increasingly towards containerisation with the scrapping of older cargo ships.

A shift in white sugar trading from the traditional government buying agencies to multiple smaller buyers had also boosted demand for smaller containerised cargoes.

Another trader said ICE was likely to remain committed to the new contract for the longer term even though some operators would remain on the sidelines to monitor the first few expiries to ensure the deliveries go smoothly.

The first trader said the new containerised contract could operate at a premium of $10-20 a tonne to the existing so-called "No. 5" futures contract, but said it was too early to know whether arbitrage between the contracts would boost volumes.

"The danger is that the volumes stay the same but are split between the two contracts," the trader said.

ICE Futures Europe said the contract would be for physical settlement with a contract size of 50 tonnes. Delivery months will be March, May, August, October and December, the same as offered for the existing whites contract.

Other delivery ports include Paranagua and Santos in Brazil, Bangkok and Laemchabang in Thailand, Mundra in India, Jebel Ali in the United Arab Emirates, Jeddah in Saudi Arabia, Penang and Port Kelang in Malaysia and Buenos Aires in Argentina.

(Reporting by David Brough; Editing by Nigel Hunt and David Evans)