MECAS(05)07 – Understanding key drivers favouring destination refineries and their possible future impact on world sugar trade

The construction of 8 large and low-cost destination refineries since 1995 in the Middle East, West Africa and Indonesia has boosted world raw sugar trade to record levels. Another 5 such refineries are due to commence operation between 2005 and 2008. Not only are these refineries boosting raw sugar trade in global terms, they are also impacting regional trade flows. In this paper the key drivers explaining the significant investment in stand-alone destination refineries over the past decade are explored and analysed as are the consequences of this trend for world sugar trade patterns. Trends in the white sugar premium are found not to drive investment in destination refining. Instead, 4 key drivers are identified as the dynamics of freight rates for bulked raw sugar and bagged white sugar, tariff protection, the surge in availability of VHP raw sugar, and rapidly growing markets for white sugar. Over coming years, the increasing availability and use of non-refined white sugar is an emerging threat to destination refineries.

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