The sugar refiner will benefit from low rates from shipping lines to transport sugar from the Dubai port of Jabel Ali, where Al Khaleej is located, to customers in the Far East, said managing director Jamal al-Ghurair. There’s a surplus of containers at the port because the UAE imports more goods than it exports, he said.
“We have a lot of empty boxes leaving Jabel Ali heading to the Far East, so we will be able to use these boxes to go back to the Far East with minimum freight,” al-Ghurair said at the International Sugar Organisation Seminar in London on Tuesday.
The refiner will be able to deliver sugar to buyers on a daily basis as containers ships leave Jabel Ali every day, he said.
Competition for business is already fierce among sugar refiners in the Middle East and North Africa because there are too many processing facilities. The battle to win business in the region will get tougher next year when sugar producers in the European Union ramp up operations as quotas that limit production and exports end.
The overcapacity has caused the premium that refiners receive for sales in the physical market to shrink. The ability of the Middle East to process sugar will soon be twice the demand from buyers, he said.
A lack of buyers prompted Al Khaleej to deliver more than 400,000 metric tonnes of white sugar to the London bourse after the December contract expired earlier this month. This was the second time the Dubai-based company opted to sell through ICE Futures Europe this year. Before that, the previous delivery was in 2006.
“Whenever there are no customers that want to buy, then the best is to deliver to the exchange,” al-Ghurair said. He added that delivering to the exchange will probably become more frequent as competition in the physical market increases.
The end of EU quotas will add to overcapacity and limit the premium that white sugar commands over the raw variety, a measure of refining profitability, al-Ghurair said.
“The competition will be more and more challenging for a refineries in the world market especially with European beet sugar coming,” he said.
EU sugar production will probably rise by at least 1.5mn to 2mn tonnes in 2017, the first season after quotas end, Stefan Uhlenbrock, an analyst at researcher FO Licht GmbH, said in an interview at the ISO seminar on Tuesday. Output this year will be 15.3mn tonnes.
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