Asia Sugar-Australia, Thailand, braced for Indian onslaught

SYDNEY/BANGKOK, Dec 12 (Reuters) - Australia and Thailand are preparing themselves for a flood of sugar exports -- as much as 4 million tonnes worldwide -- from an India bent on penetrating their traditional Asian markets.

Leading figures in the Australian and Thai sugar industries told Reuters that India was already muscling sugar into East Asian countries, including China, Malaysia and Indonesia.

But an Australian trader said: "We haven't been hearing of anything in bulk. Nothing in any great volume."

That said, more Indian exports could begin to move into East Asia after world sugar prices this week rose to a level where India has said it is keen to export.

Indian exporters were aiming to sell raw sugar on the world market at slightly over 10 cents a pound (lb), S. L. Jain, a committee member of India's sugar export corporation recently said.

After hovering between 9 cents and 10 cents a lb for months, New York sugar prices this week rose to a four-month high of 10.30 cents a lb, right in India's stated selling zone.

Australia and Thailand share the Asian market as the two biggest producers and exporters in the region. Both strongly oppose Indian export subsidies and raised complaints to the World Trade Organisation.

But both know that an Indian sugar export surplus of over 10 million tonnes in 2007/08, for the second year in a row, will lead to Indian penetration the Asian market.

THAIS FEEL THE HEAT

Indian sales in East Asia will have the biggest impact on Thailand, which is the region's leading exporter from big crops, overshadowing Australia's small, weather-affected crop.

The United States Department of Agriculture forecasts that Thailand will export 5.3 million tonnes in 2007/08 from production of 7.2 million tonnes, while Australia will export 3.7 million tonnes from production of 4.7 million tonnes.

India is forecast to export 3.0 million tonnes from production of 31.8 million tonnes and from a huge stockpile of 11.5 million tonnes. Traders believe India's exports could be as much as 4 million tonnes.

Vichai Rojlertchanya, general manager of Thai Cane and Sugar Corp. Ltd., said: "I'm sure that India will share some of Thai markets next year, especially Indonesia due to competitive freight cost".

Australia is also in the ring, competing especially for the Indonesian market, after boosting exports to nearly 500,000 tonnes of raws in 2006 from virtually nil in 2000.

Indonesia should be in the market for more raws after its agriculture minister, Anton Apriyantono, recently said that white sugar imports were unlikely next year because of higher domestic stocks, the Australian trader said.

"The statement means more demand for raws, and that's good for us," he said, adding that Indonesia should be able to produce sufficient whites from its growing number of refineries.

Thailand's Vichai believes Indonesia will import raw and white sugar next year, mostly from Thailand, given low Australian supplies.

India might also be happy to oblige.

So far Indian exports have been mainly displacing Brazilian sugar in the Middle East and West Asia, where it was most competitive, with some sales to the east coast of Africa and to Indonesia, said Australian and Thai traders and millers.

Dubai's Al Khaleej Sugar Co. refinery last month concluded a deal to buy 500,000 tonnes of Indian raw sugar, bringing its total purchases from India to 1 million tonnes, and with the prospect of buying more.

Up to now, Australia has been more concerned about the effect of India's surplus on world prices than about direct competition. But if prices stay above 10 cents, things might start to change.

(Editing by Ben Tan)
By Michael Byrnes and Apornrath Phoonphongphiphat