Dubai’s Al-Khaleej Sugar operating at 70% capacity

DUBAI:- Dubai’s Al-Khaleej Sugar Refinery, the world’s biggest port-based refinery, said yesterday it was operating at only 70 percent 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 ton seen as very attractive margins.

The whites-over-raws premium traded above $110 per ton in the global market on Monday 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, it’s 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 ton in 2016,” he said. The Al-Khaleej refinery has a capacity of 7,000 tons 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 percent 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 program, as the country’s own production rises. Ghurair also said Al Khaleej was wellstocked 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. — Reuters