• 1.4m tonnes raw sugar import permits for H2’19 have been released to Indonesian refiners. 
  • This is less than we’d expected; we are hopeful further permits might be allocated later this year. 
  • Indonesia is the world’s largest raw sugar importer; slow demand is not helpful for the world sugar market.  

Refinery Raw Sugar Imports Could be the Lowest in 8 Years 

  • The allocation means Indonesian refiners can import 2.8m tonnes raw sugar in 2019.  
  • This is 14% lower than what they were allowed to import last year and would be the lowest amount since 2011.

  • However, we suspect that refiners might be allowed to import 3m tonnes in total in 2019. 
  • This is because refined sugar stocks could be low at the end of the year if the government sticks with its current allocation.

Sugar Mills May Import Raws Too 

  • In Indonesia, refiners import raw sugar to make refined sugar to sell to food and beverage companies. 
  • Sugar mills sell higher colour whites to other domestic consumers, made either from sugar cane or imported raws. 
  • This year we think the sugar mills will be given special raw sugar import licenses because cane sugar production has been static at around 2.2m tonnes, yet local consumption is increasing.

  • However, these special import licences have been delayed. 
  • This is because we are awaiting a Cabinet reshuffle following the recent general election in Indonesia.

  • We expect special licenses to be released towards the end of July, and to total around 815k tonnes. 
  • This would be 34% lower than last year’s allocation, due to the high level of whites stocks that remain in-country following 2016’s high import licence allocation.

What Does the Reduced Raw Sugar Demand Mean? 

  • It’s clearly bad news that the world’s largest raw sugar destination intends to import reduced volumes. 
  • Thai raws remain the dominant feedstock into Indonesia, and Thailand this year has an oversupply of raw sugar.
  • The lower allocation of Indonesian raw sugar import permits could be one reason why Wilmar delivered 600k tonnes Thai raws into the July’19 futures expiry recently.

  • This means that Thai raws are effectively being valued at close to flat futures; compared to normal years where the East Asian raw sugar deficit means they are usually priced at a premium to the futures.