sugar fire brazil Copersucar

Firefighters struggle to put out a fire at a warehouse storing sugar at the port of Santos October 18, 2013. A fire on Friday destroyed up to 300,000 tonnes of sugar and much of the Santos Port warehouses owned by Copersucar, the world’s largest trader of the sweetener, the port authority of Santos said. REUTERS/Paulo Whitaker

reuters logoBy Reese Ewing and Fabiola Gomes

SAO PAULO, Oct 18 (Reuters) – A fire ravaged Copersucar’s sugar terminal in Brazil on Friday, paralyzing operations of the world’s biggest sugar trader and putting 10 million tonnes of export capacity offline for six months or more.

The fire hit all of Copersucar’s warehouses at the Santos port, igniting 180,000 tonnes of sugar – roughly 10 percent of Brazil’s monthly sugar exports – and driving prices of the sweetener to a one-year high on global markets.

The loss of nearly all of its port capacity will send Copersucar scrambling to lease or rent terminal space to cover its obligations to global buyers and exchanges in the coming months. Copersucar says nearly a fifth of the world’s sugar exports flows through its trading desks.

“A conservative estimate would be six months to get this in operational form (again),” said a U.S. trader. “The jewel in their crown has been effectively destroyed.”

Copersucar’s rivals in Brazil will likely pick up some of the slack left by the fire and benefit from the extra export volume and improved sugar prices. The fire did not affect terminal operations at other exporters at Santos, such as Cosan SA, Sao Martinho SA or Noble.

The disaster adds one more bend to the tortuous path that Brazilian agricultural products must take to global markets. Potholed roads, scarce rail transport and backed up ports already undercut margins of Brazilian sugar and grain producers and cause headaches for global commodity markets.

(For details on Santos sugar capacity see: )

Santos port authority Codesp, which manages day-to-day operations at Brazil’s main port, said the fire started in the conveyor system, which transports sugar through Copersucar’s warehouses, around 6 a.m. Brasilia time (0900 GMT).

Television footage showed a three-story high mountain of sugar engulfed in flames inside a warehouse that had lost most of its siding and roof to the flames. Some of the overhanging conveyor belts that transport sugar between the warehouses and eventually to waiting ships appeared to have toppled over or were lying on the pavement alongside some of the warehouses.

Firefighters eventually contained the blaze, which could keep smoldering for another two days, said Codesp, noting that “facilities involved in the accident are totally destroyed.”

International sugar markets reacted quickly. ICE March raw sugar prices rose more than 6 percent to a one-year high on news of the fire before paring gains. The March contract settled up 2.5 percent at 19.48 cents per lb.

Copersucar officials said they had no additional information about the cause or containment of the blaze beyond what the fire department and port authority Codesp reported.

COUNTING ON STOCKPILES

Analysts at investment bank Credit Suisse said the destruction of the terminal infrastructure would not only affect short-term deliveries but would “also cause a disruption in Copersucar’s loading operations in the next 3-6 months.”

Local commodities risk management adviser Archer Consulting said, “We imagine for example a scenario of eight months to a year before the terminal returns for full capacity.”

Brazil is at the tail end of a record 585 million tonne center-south cane harvest that is expected to produce 34 million tonnes of sugar. While roughly 15 percent of the crop remains to be crushed, sugar mills will shut down by Christmas and not resume production until April at the soonest.

Huge global stockpiles are contributing to a global glut of roughly 4.5 million tonnes of the sweetener, giving some wiggle room to cover shipments that Copersucar may struggle to make in the months to come, traders said.

Backwardation, or the spread of nearby over later month deliveries for sugar futures, flared on news of the fire, which will crimp the world’s main sugar port’s ability to meet its expected shipments to the New York ICE exchange.

Without Copersucar’s terminal, which was expected to deliver the bulk of shipments from Santos this month, the port could struggle to cover the roughly 996,000 tonnes of sugar that ICE says it will ship in October. ICE forecasts 1.37 million tonnes of Brazilian sugar shipments this month.

In June, Copersucar inaugurated an expansion project at Santos that doubled its export capacity to 10 million tonnes a year.

Copersucar represents 47 sugar mills in Brazil and recorded revenue of $4.1 billion in 2012. The company had hoped in June to expand its annual trading volume to 9 million tonnes from 7.2 million tonnes in 2012.

When large stockpiles of sugar catch fire, it can be extremely difficult to extinguish quickly. As the sugar burns into the center of the mound it creates a carbonized outer shell that inhibits the penetration of water and chemicals that would otherwise snuff out the blaze.

Firefighters will also have the challenge of dealing with subterranean passages that connect some of Copersucar’s warehouses through which sugar is transported.

Fabrienne Pointier at data provider Platts said the loss of the large volume of sugar is not as bad as the damage the fire has done to Copersucar’s infrastructure at Santos.

“The real significance is that it is going to slow down the logistics. It’s going to be many months to rebuild those warehouses,” Pointier said.

(c) 2013 Thomson Reuters

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