Low prices in 2020 incentivised stockpiling of refined sugar. This was compounded by COVID lockdowns, which hit consumption and meant white sugar stocks were very high throughout the first half of this year.
The rising No.5 futures and freight prices throughout 2021, however, discouraged buying and the high stocks meant consumers were happy to avoid buying, causing severe weakness in the refined market.
This was highlighted by the white premium dropping below 50 USD/mt in August.
However, relying on stocks can only take consumers so far.
We think consumers may be starting to return to the market, and the quickly strengthening Z/H spread supports this, along with the steady increases seen in the H/H white premium.
Source: Czapp’s Sugar Futures and Market Update
On top of this, Sudan, the largest global buyer of refiner sugar, will change its port rules to ban the use of 50kg bags from 2022. This will limit the ability of the trade to ship No.5 deliverables to Sudan. There’s been an increase in Sudanese demand ahead of this rule change.
Other Opinions You Might Be Interested In…
- Czapp’s Sugar Futures and Market Data: 11th October 2021
- October Trade Flows: Excess Raw Sugar
- Market View: At 20c Again
