Wilmar plans Brazil tie-up to rival sugar-export giant

The global sugar market is forecast to swing to a deficit next year. Futures in New York have surged 50 per cent to 15.15 US cents a pound from a seven-year low of 10.13 US cents on Aug 24.
The global sugar market is forecast to swing to a deficit next year. Futures in New York have surged 50 per cent to 15.15 US cents a pound from a seven-year low of 10.13 US cents on Aug 24.PHOTO: BLOOMBERG NEWS

Deal with Raizen Energia will boost its trading muscle, comes amid forecast of global sugar deficit next year

NEW YORK • Raizen Energia and Wilmar International plan to establish a sugar venture in Brazil to rival the partnership between Cargill and Copersucar, the nation's leading exporter this year.

The new joint venture will strengthen existing integrated production and trading operations. This was announced by Sao Paulo-based Raizen, a partnership between Royal Dutch Shell and Cosan, on Wednesday in a filing with Brazil's anti-trust regulator Cade. The agency is reviewing the proposal.

The Latin American country is the world's biggest sugar producer and exporter. Singapore-based Wilmar has sugar operations in countries that include Australia, Indonesia and India.

In March last year, Cargill teamed up with Sao Paulo-based Copersucar, a cooperative of Brazilian sugar mills, to expand in global trading. Their Alvean venture in the 11 months that ended Nov 30 was the biggest exporter with 3.26 million tonnes, according to data from Santos, Brazil-based shipping firm SA Commodities.

Raizen sold 3 million tonnes to be shipped by other companies, with 1.04 million bought by Wilmar. The Singapore company sent 2.4 million tonnes overseas.

"You are going to see more concentration in the market," Mr Michael McDougall, a senior vice- president for Societe Generale in New York, said in a telephone interview. "The cheap real has given foreign companies the opportunity to take a closer look at acquiring assets or investing in Brazil."

Analysts at Czarnikow Group and Rabobank International forecast that the global sugar market will swing to a deficit next year.

Futures in New York have surged 50 per cent to 15.15 US cents a pound from a seven-year low of 10.13 US cents on Aug 24.

Sugar prices posted an annual drop in each of the four years ended 2014, a record slump. About 50 Brazilian mills out of 340 have closed and 10 more are expected to halt operations in the current season, industry group Unica said in a May report.

The Brazilian real slumped 33 per cent this year and is heading for its fifth annual drop against the US dollar, the most since 2002.

This year, Wilmar took delivery of more than 3.5 million tonnes of raw sugar against expired contracts on ICE Futures US in New York.

Raizen said in the filing that it focuses on production, while Wilmar is active in the export market, alleviating antitrust concerns.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 25, 2015, with the headline 'Wilmar plans Brazil tie-up to rival sugar-export giant'. Print Edition | Subscribe