Rejected sugar arrives from Iraq

The regional trading hub of Dubai could be facing a sugar glut with the unplanned arrival of six large cargoes in the past one month.

At a time when demand and prices normally rise - because of Ramadan and Eid - prices have fallen by up to 6.5 per cent over the past week to a fortnight, confirmed sugar traders.

The sugar was destined originally for Iraq under its food-for-oil deal, but for some inexplicable reason it was not allowed to be unloaded at Iraqi ports.

The ships have since unloaded these cargoes in Dubai and Fujairah, according to shipping industry officials. They said these cargoes are large, ranging in size from 250 to 800 tonnes of sugar each, and have been arriving over the past month.

Confirming the arrival of the unplanned cargoes, sugar traders said up to a fortnight ago prices of sugar in the local market ranged up to Dh46 for a bag of 50 kilos. Since the arrival of the extra sugar, a 50-kilo bag is now fetching about Dh43 in the wholesale market.

The cost comes to about Dh40, and the halving of the difference to just Dh3 in just over a week, has put pressure on profit margins. Ramadan and Eid Al Fitr are usually times of high demand and high profit margins for the trade, dealers said.

The market here is big. Not only is sugar used for local consumption, it is also supplied to the food processing industry and the beverage canning and bottling plants - apart from re-export activity.

Local consumption is of high quality. Lower grade sugar is re-exported, mainly to Africa to countries such as Somalia. Somali traders are willing to pay up to Dh45-46 for a 50-kilo bag.

Some brokers here are selling the cargoes to them directly from off the high seas, meaning that sugar-bearing ships are at times redirected to Somalia even before they touch here - thus saving costs.

The sugar market in Dubai was estimated at around 300,000 tonnes, according to the last available figures.

Imports of sugar stood at 186,496 tonnes worth more than Dh398.94 million in 1997. Re-exports were 113,768 tonnes worth about Dh157.54 million, leading to a local consumption figure of about 172,728 tonnes valued at Dh241.39 million.