- Thai mills have increased their allocation of raw sugar to be remelted into refined.
- This could be a factor behind the recent weakness in the white premiums.
- However, raws and whites returns have again converged and are both negative.
Aug/Jul’19 White Premium
- We now forecast the remelt will be 3.5m tonnes this season, down from 4m tonnes last year but still historically high.
- Despite this, Thailand still has too much raw and white sugar to sell this year.
Thai Remelt Target Changing?
- Refined physical values have remained at flat futures, with a small premium for containerised movements.
- This is because regional demand for whites is exceptionally slow.
- In particular, we think Chinese smuggling of white sugar has slowed dramatically.
- The problem is that without any premium for whites, and with the Q/N arb below $60, mills are no longer being incentivised to remelt, even though raws premiums have weakened too.
- We are now in a position where returns for the mills for both raws and refined are negative, and the decision of what to produce is marginal.
Refining Returns (White Premium + Cash Values – Raws Prem)
- We suspect many mills will now wait in the hope that returns for either product improve.
- We will continue to monitor the situation.
Thai Raws Premium
