Rising exports from India and Thailand are expected to partly replace Brazilian sugar in Asia and the Middle East. This could damage tonne-mile demand in the dry bulk market, Drewry reports.
Brazil is the upmost sugar exporter globally, considering that it exports sugar to more than half of the world. Yet, it has revealed signs of decline this year because of the competition coming from international market at a high rise in oil prices. The increase of oil prices make Brazil divert more sugarcane in comparison to ethanol production.
- As fas as shipping is concerned, if Brazilian sugar exports of 3 million tonnes to the Middle East, North Africa, Asia and the Pacific are to be replaced by Indian exports it will lower the demand for Handysizes by about 5 vessels per year. This is an example of when the geographical pattern alters, it has pros and cons on dry bulk shipping demand.
Moreover, during the first three quarters of 2018, Brazil’s sugar exports showed a decrease by 5.8 million tonnes on yearly basis. equal to approximately 160 Handysize shipments. The biggest part of the decrease was in exports to the Middle East, North Africa, Asia and the Pacific.
According to Rajesh Verma, one cause concerning the decrease was that Thailand and India had a big sugar availability. The production and growing exports in both countries have topped the competition in Asian and Middle East markets. As a result, there was a major decline in sugar prices.
- On the contrary, Indian sugar exports have risen in 2018 and it is expected to reach its peak in 2019. India is facing a groundbreaking sugar production the last 2 years and it already has sugar stock for about 10 million tonnes.
India has been obliged to export 5 million tonnes of sugar in 2019. Also, the Indian government has scrapped export duty, doubled import duty and decided to compensate exporters for transportation expenses. In 2017 India exported 2 million tonnes of sugar, so the country has big expectations for 2019.
- Thailand’s sugar export is rising on low domestic consumption. In the first three quarters of 2018 Thailand’s exports rose by 31% in part due to softening in domestic demand. The domestic demand has softened because the government passed a sugar tax in 2017 on specific beverages.
Another hike in sugar tax rates is scheduled for October 2019 and this is expected to lead to a further decline in domestic sugar demand. Thai sugar production is set to continue increasing, that is why exports are also expected to grow over the next two years.
Finally, rising exports from India and Thailand, will find markets in nearby regions- the Middle East, North Africa, Asia and the Pacific being prime destinations. Long haul shipments from countries such as Brazil will mostly likely be limited to cover regional net deficits.
