Cheap sugar from India and Brazil forces cuts on Gulf refiners
Gulf sugar refiners are cutting production due to an influx of cheap sugar from India and Brazil. Dubai’s Al Khaleej Sugar is operating at 70% capacity, with some Middle Eastern refineries as low as 30-40%. Falling prices and weak refining margins have reduced profitability. However, analysts expect a market rebound as Indian production declines.
Cheap sugar from India and Brazil flooding the global market has forced Gulf refiners to cut production.
Managers at Al Khaleej Sugar in Dubai told local media at a conference that the company was operating at 70 percent capacity as regional sugar refineries struggle with overcapacity.
The UAE is among the top consumers of sugar, with an average consumption of 213kg per person per year – a fact that normally benefits local producers.
The company’s managing director, Jamal al-Ghurair, said that some refineries in the Middle East are operating at 30 to 40 percent capacity.
“There is no increasing demand,” he said.
Al Khaleej produces 1.6 million tonnes a year, with 20 percent sold on the local market and 80 percent sent for export.
Rodrigo Bermejo, manager for sugar and ethanol analysis at Expana, a US-based commodity research firm, told AGBI that recent margins have not been attractive to local refineries, and it has led those to operate below maximum capacity.
The difference between raw and refined sugar prices, known as the “white premium”, for short-dated contracts has stayed below refining costs since October last year, Bermejo said.
Sugar prices fell by 7 percent last month, after India exported 1 million tonnes and Brazilian production reached record highs in the 2024-25 season.
Brazil and India account for 25 percent and 19 percent of global sugar production, respectively. No Gulf country is among the world’s 10 largest sugar producers.
Manoj Nair, a research analyst at Euromonitor International, said the UAE was exposed to price drops because of the 2022 comprehensive economic partnership trade agreement between India and the emirates.
UAE buyers “stand to benefit from the recent Indian sugar export more, while the rest of the GCC will continue to see imports from Brazil, India, the EU, China and others,” Nair said.
Health trends also affect demand, as consumers, in some cases spurred by rising prices from specific taxes, substitute sugar with other sweeteners, Nair said.
Bermejo said he expected Gulf sugar producers’ current difficulties with cheap sugar to be short lived, because most analysts have revised predictions for Indian sugar production downwards.
“Given the tight outlook for India and the strong sugar demand seen in the Middle East and North Africa, Gulf producers should find incentives to optimise their production soon,” he said.
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Source : AGBI
