SAO PAULO Oct 21 A fire on Friday at Copersucar's sugar terminal, the largest in Brazil, means the company is likely to need to find space elsewhere from which to export the sweetener next cane season while it rebuilds the warehouses.
Copersucar lost 180,000 tonnes of sugar, or 10 percent of Brazil's monthly exports to the fire. With global markets flush with a surplus in sugar, the destruction its five warehouses is a bigger challenge for the company and for sugar importers.
When Copersucar set out in 2011 to double its Santos Port terminal capacity to 10 million tonnes a year, it took until this June to complete the work, two years later.
"The size of Copersucar's export terminal will make it difficult to finish construction in less than a year, so we will not be back to the same export capacity soon," Tarcilo Rodrigues at analysts Bio Agencia said.
The fire was barely smoldering and under control on Monday, a spokesman at Santos Port, Sergio Coehlo said. The port has not yet received any communication from Copersucar on the firm's reconstruction plans for the terminal, he added.
Rodrigues, the analyst, said Copersucar will likely try to ship more sugar out of Paranagua Port about 260 miles (400 km) to the south of Santos and perhaps from the Rumo terminal next door, which is controlled by Cosan, or Noble's.
Copersucar represents 47 sugar mills in Brazil and recorded revenue of $4.1 billion in 2012. The company had hoped to expand its annual trading volume to 9 million tonnes this year. In 2012, Copersucar had exported 7 million tonnes of sugar of the 24 million that Brazil exported.
Copersucar is still studying the damage and hasn't made estimates on how long it will take to rebuild the warehouses, said Leonardo Aragão, a spokesman for the company. He did not comment on what the firm would do in the meantime.
Huge global stockpiles in sugar are giving some wiggle room to cover shipments that Copersucar will need to make in the months to come, traders said.
This crushing season is 80 percent complete in Brazil's main center-south region, with only about two months left until harvest winds down, so more affects will be felt next season when harvest peaks again in May through September.
"Most of this year's sugar has been exported but the effects will be felt on next year's exports. Ship lineups may grow at Santos during the peak of sugar crushing," said lead sugar analysts Mauricio Muruci at Safras e Mercado consultants.
In 2010, ships waited for over a month to load sugar during the peak of harvest in June due to a backlog at Santos. Without Copersucar's capacity these delays may be more likely to happen again, analysts said.
Given the roughly 4.5 million tonnes global surplus in sugar, the loss of the physical product is the least of Copersucar's problems and is not likely to hurt immediate global supplies. Stocks in consumer countries are high.
One manager of sugar trading at a major multinational sugar exporter with capacity in Santos who preferred to remain unnamed said that Copersucar was trying to work out its deliveries in the short-term first but would have trouble with next year too.
The fire adds one more bend to the tortuous path 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: , )
International sugar markets reacted quickly after news of the fire. ICE March raw sugar prices rose more than 6 percent to a one-year high on Friday before paring gains. The March contract settled down 0.26 percent at 19.45 cents per lb Monday.
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.
Julio Maria Borges, director of JOB Economia analyst, said The loss of export capacity will restrict the supply from Brazil slightly but added that the fire's effects will be limited on the global level.
"The loss in export capacity will be absorbed by other terminals that are run by Cosan's Rumo or Noble or other traders," he said.