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The refinery: difficult times

The refinery: difficult times



Production down at Dubai sugar refinery

Additional capacity brought on in the region has added to the woes of Al Khaleej Sugar Refinery as it waits for physical off-takes with ample raw sugar in stock

March 2016

Dubai’s Al Khaleej Sugar Refinery, the world’s biggest port-based refinery, has said it is operating at only 70 per cent of its capacity due to slow physical demand for white sugar despite high white premiums.

“There is no real physical off-take, the physical off-take is very slow,” Jamal Al Ghurair, managing director of the refinery, told Reuters in an interview ahead of the Dubai Sugar Conference.

The whites-over-raws premium is a measure of refining profitability with levels over $100 per tonne seen as very attractive margins.

The whites-over-raws premium traded above $110 per tonne in the global market for the first time since August, driven by strong import demand by China, the world’s top sugar buyer.

However, Ghurair said high premiums were a reflection of a “paper squeeze,”not physical demand. “There’s no real buyer, its just a paper squeeze ... it is a paper manipulation,” he said. He expects white premiums have reached their peak and will probably go down in the summer.

“We will probably see them at $80 to $100 a tonne in 2016,” he said.

The Al Khaleej refinery has a capacity of 7,000 tonnes a day but is being underutilised as export prospects are weak. “We are entering 2016 with more uncertainty than certainty,” he said.

A number of refineries came onstream in the Middle East in recent years in Yemen, Bahrian and Iraq with more capacity in Oman and Saudi Arabia due to come onstream in the next few years.

Iraq, once a top export destination for the refinery, is now producing most of its white sugar locally after the Babylon-based Etihad sugar refinery came onstream in 2015.

Ghurair said Al Khaleej was only exporting 20 per cent of what it used to export in the past to Iraq.

“We are exporting very little to Iraq,” he said.

Al Khaleej exported 500,000 tonnes of white sugar to Iraq in 2014. Iraq said in December it would stop imports of refined sugar for a government food distribution programme, as the country’s own production rises.

 

WHAT NEXT?

Ghurair also said Al Khaleej was well-stocked with Brazilian raw sugar and had enough to last until the third quarter of 2016, but declined to give an exact figure.

“When the market picks up I will be ready but we need some signs or orders to do more,” he said. No new investments are being planned whether regionally or abroad and no maintenance plans were scheduled for 2016.

“The best thing to be in sugar now is passive, not to do any active investments,” he said. Ghurair also ruled out plans for any takeovers or consolidation with regional refiners.

“There is no advantage to it,” he said, adding that around 40 per cent of refining capacity in the region was not being used.




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