[SINGAPORE] Wilmar International Ltd said it has booked for shipment almost all the 1.9 million tonnes of sugar it scooped up two months ago in the biggest-ever exchange deal, even as traders fret about weak demand and low prices.
The Singapore firm, one of the biggest merchants in the 180-million tonne sugar market, has booked spots on vessels for all but 100,000 tonnes of the US$550 million worth of sugar it bought when the May contract expired.
Wilmar expects to call on sellers to load the remaining tonnage this week, the company said in an emailed statement.
After months of uncertainty about the pace of the shipments from Brazil and Central and South American growers, the news may help restore some calm to the sweetener market. Prices languish near 6-1/2-year lows as the market struggles through a fifth straight surplus year.
On Wednesday, the spot July contract's discount to October prices flared out to 0.54 cent a lb, its widest since early April as traders raced to liquidate positions.
Tensions are high ahead of the July contract's expiry next week. The size of Wilmar's purchase, which roiled prices and spreads, has "scared everyone away," a US merchant.
Traders speculated Wilmar was betting on demand from Asia, even as Brazil and Thailand are expected to produce bumper crops and refiners in China and the Middle East have plentiful stocks.
The 14 per cent plunge in prices since the end of April has knocked US$62 million off the value of Wilmar's May haul.
Still, Wilmar's comments suggest bookings have been faster than many traders had feared. Wilmar has until mid-July to reserve spots on ships for the sugar, but talk of cancellation of some 500,000 tonnes spooked traders in May and pressured Brazilian physical prices, known as differentials.
Some of the boats booked by the company from Brazilian ports are bound for major consuming regions, India, Southeast Asia and Africa, according to the latest shipping data from Williams.
Traders also worry the sugar will be stored at refineries, stymieing demand further.
The company's purchase was the biggest in a series of exchange deals that have jolted the biggest soft commodity market by turnover and liquidity.
Some expect the July delivery will be small to modest even though the contract's open interest remains sizeable at 66,284 lots. "I would suspect with prices down at these levels, you will see a number of producers in Thailand and Brazil rolling forward," said James Liddiard, senior vice president of Agrilion in New York.