Asian market hesitates as contracts default
Published: 03/11/2010, 8:44:28 AM
A small quantity of Thai raw sugar changed hands this week but the physical market was barely alive after futures tumbled on washouts on cash deals by key consumer India, according to Reuters.
Thai raw sugar was bid at 165 points over New York for March-May delivery, up from 130 points offered last week, with deals reported at 170 points against futures which sank to their weakest in seven months on Wednesday.
Around 50,000 tonnes of white sugar were being loaded at Thai ports for shipment to Indonesia, and another 50,000 tonnes for India but the shipments were part of the old contracts.
"People don't want to try to catch a falling knife, but there are signs that maybe the bottom has been hit, although that was also said a week ago," said a physical dealer in Singapore.
"With the spectacular futures fall, people are unwilling to commit to physical purchases at the moment. Although if the market does manage to stabilise, this could change quickly."
Premiums for J-spec, or the low-polarization sugar for the Japanese market, rose to 115 points over New York from 90 points last week, with bids seen at 90 points. There were no reports of deals.
"The market is around 30% off the peak and I am sure there will be stories about washouts or defaults coming along. That adds on to the bearish sentiment," said another dealer in Singapore.
"It's a very illiquid market and I see raws offered at 240 points. There's very little trade for consumers in the region, it's more for the Middle East," he added.
Physical trading was slow in Thailand, the world's second-largest exporter after Brazil, as fears about defaults lingered, but dealers were hoping to strike new deals if prices dropped further.
"We expected demand from China, Indonesia and India to come if prices fall a bit lower," said one dealer in Bangkok.