New refineries in the Middle East boost demand for sugar from Brazil

Two of the new units are being built in Saudi Arabia and should be ready between the last quarter of 2021 and the first semester of 2022, while another plant is being built in Oman and should be completed in 2023.

Currently, the region that encompasses the Middle East and North Africa has eight active sugar refineries, which have the capacity to refine around 9.3 million tons per year. They are located in Algeria, Egypt, Iraq, Morocco, Oman, Saudi Arabia, Tunisia and the United Arab Emirates. These countries were the destination for around 28% of Brazil’s sugar exports last year.

In Czarnikow’s estimation, the biggest beneficiary of these investments in the region will be Brazil, which is already the world’s largest exporter of raw sugar and has competitive costs and logistics to serve the Middle East. The trading company estimates that, if the three refineries operate at full capacity, they will demand from Brazil 2.5 million tons of raw sugar a year, 10% more than in the previous harvest.

These new units will also increase the global presence of refined sugar from these countries in the world. Czarnikow calculates that, considering that the region has a local consumption of 8 million tons of refined sugar per year, the addition of capacity should allow these countries to export 4.3 million tons of refined sugar per year — if all the units operate at their maximum capacity.

These exports will mainly go to Yemen and East Africa, believes the trading company. Initially, new refineries may struggle to gain market share in these locations, but India’s reduced share of the global refined sugar market, resulting from the new ethanol mandate, could open up space, assesses the British house.

Source: Valor Econômico

Text extracted from the SCA bulletin