* Fire consumed 180,000 tonnes sugar, says Copersucar
* Biggest loss to sugar market: Brazil export capacity
* Rebuilding infrastructure may take 6 months to year
By Reese Ewing and Fabiola Gomes
SAO PAULO, Oct 18 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
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.