Fire at the Port of Santos causes sugar prices to rise.
A fire at warehouses belonging to Copersucar, Brazil's largest sugar trading company, boosted raw sugar futures, which rose by about 6% to a nearly one-year high on Friday.
LONDON, Oct 18 (Reuters) - A fire at warehouses belonging to Brazil's largest sugar trading company, Copersucar, in the Port of Santos, boosted raw sugar futures, which rose as much as 6 percent to a nearly 1-year high on Friday, before the market gave back some of the gains, traders said.
At 12:30 pm (Brasilia time), March raw sugar futures were up 1,74 percent at 19,33 cents per bushel, after hitting a 1-year high of 20,16 cents earlier in the session due to fears about the impact the fire would have on Brazilian exports.
The fire affecting at least three Copersucar warehouses was still not under control by late morning, and it is estimated to have affected around 300 tons of the product, stated Codesp, the agency responsible for the port of Santos.
"I think the market reaction is justified. Santos is the main supply point for raw sugar for the whole world," said Czarnikow's director, Toby Cohen.
"Today's increase is due to short covering. But in the long term, the implications are even more significant—especially for the availability of sugar for export until the end of the harvest."
"If the fire damages the ship loading equipment, there will be an even bigger problem. The loading facility is far more important to the global market than the loss of sugar," said Cohen.
According to Credit Suisse analyst Viccenzo Paternostro, the event "will likely not only affect sugar deliveries in the short term, but will also disrupt Copersucar's loading operations for the next 3 to 6 months," Paternostro said in a note to clients.
"I spoke with Cosan and São Martinho, and they mentioned that Rumo's operation was not affected by the fire, which means they may have some advantage from higher prices without a reduction in volume," said the analyst.
Cosan's logistics unit, Rumo, should also benefit, either from increased volume or higher prices.
According to Czarnikow, bulk sugar exports from the port of Santo reached approximately 2 million tons per month this season, and Copersucar is responsible for about 25 percent of the port's exports.
Brazil accounts for about 50 percent of the global sugar trade.
With this scenario, white sugar traded in London (Liffe) rose 0,95 percent to $511,1 per ton. The commodity had reached a high of $529,4 earlier in the session.
(Reporting by Sarah McFarlane; Additional reporting and text by Fabíola Gomes, in São Paulo)