Indonesia's issue of additional tolling licenses spur Thai HiPol sugar buying activity

The Indonesia government released more special licenses for tolling to local refineries and sugar mills after news that Vietnam will be delaying an antidumping investigation on refined sugar coming from neighboring ASEAN countries -- Indonesia, Malaysia, Cambodia, Laos and Myanmar -- to July 21, two months later than the initial deadline of May 21.

Vietnam is one of the largest importers of refined sugar in Asia and ever since the government announced that imports of Thai refined sugar will be levied with a 47.64% duty, more Indonesian-origin refined sugar has been making its way into the country.

More sugar volumes from Indonesia, Malaysia, Cambodia, Laos and Myanmar have been flowing to Vietnam after Thai shipments got slapped with the import duty. This led to the Vietnamese Ministry of Industry and Trade investigating on sugar coming from these five countries in a bid to protect the domestic market's interest. This investigation aims to conclude by May 21.

However, the ministry announced May 16 it will be extending the investigation till July 21.

Following the extensions, the Indonesian government released more special licenses to refineries and sugar mills.

A total 400,000 licenses were released in addition to the 4.23 million mt of import quota issued in December 2021, while this license to import for tolling is only valid for a period of six months. This means that the raw sugar must arrive in Indonesia by November, according to market sources.

"The purpose of this license is for reexports to the global market but it would probably be exported to Vietnam for now considering the country's demand and how Indonesia's refined sugar is able to enjoy a 5% duty compared to the Thais," a Singapore-based sugar trader said.

There are a lot of uncertainties on the Vietnam antidumping investigation, such as what percentage of import duty to be imposed and its timeline, according to market sources. Therefore, Indonesian sellers are trying to capitalize on this flow to Vietnam before the tariffs are in place.

"Premiums have been increasing after the licenses were released, especially the spot cash. Indonesia is rushing to import raw sugar to have supply of refined sugar to be shipped to Vietnam before the July 21 deadline," said a Hong Kong-based trader.

The release of this special license coupled with India limiting exports to 10 million mt till Oct. 31 has led to a surge in Thai HiPol premiums.

The spot Thai HiPol premium surged 35% compared with a month earlier to be assessed June 1 at 180 points over New York No. 11 July futures. Platts also assessed the July-Sept. 15 loading cargoes up 20% at 184 points over New York No. 11 July futures, compared with 155 points on May 4, according to data from S&P Global Commodity Insights.