Dubai: Global sugar refineries cannot maintain profitability due to falling prices of the commodity in the last five years, according to industry experts at the Kingsman Dubai Sugar Conference on Sunday.

“Sugar refineries cannot sustain a $50 [or] a $60 [Dh220.20] whites-over-raws premium [which measures refining profitability] and say we can be in business for a long time,” said Jamal Al Ghurair, managing director of Al Khaleej Sugar, the world’s biggest sugar refinery.

Raw sugar prices continue to fall as production outweighs consumption. Globally, there is a surplus of an estimated 1.73 million metric tonnes in the 2014-2015 season that started last October, according to Pradeep Unni, senior relationship manager at Richcomm Global Services.

Raw sugar futures are down 55.5 per cent to 16 cents per pound in early 2015 compared with early 2011, when the commodity was priced at 36 cents per pound, according to the Intercontinental Exchange (ICE) website.

Mills in Brazil, India and China have struggled with years of tumbling prices and shrinking margins, with some closing down due to slowing demand.

Brazil and Thailand are the world’s two largest producers of sugar.

However, Unni expects a sugar production deficit in the 2015/2016 season. “This year, [the market] will probably go toward a deficit, as high as 4 to 5 million metric tonnes,” he told Gulf News by phone.

Next year

The market’s turn to deficit is expected to be a result of rising global consumption; using sugarcane in ethanol production; and a reduction of sugar crushing activity in China and India due to increased sugarcane procurement prices and lower global sugar prices, according to Unni.

He expects whites-over-raws premium to be higher next year. The premium has been “coming down [in the last six months] due to lower oil prices and merchants selling sugarcanes at discounted prices,” he said.

Al Ghurair said that Al Khaleej, which exported 1.2 million tonnes of sugar last year, expects stable demand from its customers this year compared with 2014, which saw “flat” demand because “population growth is not much around the world.”

Meanwhile, competition in the region is expected to increase as the number of sugar refineries grow.

“Refineries seem to be growing like mushrooms lately. We believe there will be a fierce battle in the Middle East. We are not optimistic about that part of the world,” said Alexandre Luneau, member of the executive committee at Tereos, a French sugar maker.

Al Ghurair said last year that there are two new players coming onto the market in Bahrain and Yemen, which will add to the competition.