Sugar prices in India are firming on fears of short-term supply constraints and seasonal demand even as global prices are sliding, posing a threat to a recent recovery in exports from the world's second-biggest producer of the sweetener. A raised sugar import duty in India, festival demand and an expected delay in cane crushing in a key producing state have helped push domestic prices to a $70 a tonne premium to international prices, making it more lucrative to sell domestically.
A year ago the premium was just $20 a tonne. Lower exports from India could provide short-term support to global sugar prices that hit a seven-month low on Monday and give leading sugar exporters such as Brazil and Thailand an opportunity to take more of the market. India last week raised the import duty on the sweetener to 25 percent from 15 percent to help mills, which are struggling with overflowing warehouses due to bumper crops over the past few years. Government-set prices for sugar cane are also hurting them. "The import duty hike has isolated the Indian market from global price trends. Local prices won't fall due to global surplus," said Ashok Jain, president of the Bombay Sugar Merchants Association.
Thailand is offering white sugar at around $430 per tonne, but Indian mills won't offer below $500 due to relatively higher local prices, said a Mumbai-based dealer, who declined to be named as he is not authorised to talk to media. India's local prices have risen 10 percent so far in 2014, while global prices have fallen 4.3 percent.
