Exclusive: Raízen, Wilmar set to end sugar trading venture RAW

NEW YORK/LONDON (Reuters) - Brazil’s Raízen, the world’s largest sugar-making company, and Asian commodities trader Wilmar International are set to end their partnership in the global sugar trading joint venture RAW, four sources familiar with the process said.

The joint venture, formed in 2016, was the second-largest trader of Brazilian sugar, with volumes around 4 million tonnes annually, and its dissolution will make the market more fragmented.

Officials at Raízen wanted Wilmar to move RAW into shared investment opportunities, including expansion plans in Brazil, but Wilmar disagreed, so Raízen decided to dissolve the unit, according to one of the sources familiar with the matter. The sources asked not to be named, because they have business links to both companies.

Raízen said it would not comment. Wilmar did not return requests for comment.

When the venture was formed, it had the capability to trade all of Raízen’s production of more than 3 million tonnes of very high polarization (VHP) sugar per year, plus 1.5 million tonnes that Wilmar sourced from other producers in Brazil.

The end of the joint venture will reduce consolidation in the global sugar trade. It makes Alvean, a joint venture between commodities giant Cargill [CARG.UL] and Brazilian sugar and ethanol merchant Copersucar, much larger than any competitor, with volumes nearing 10 million tonnes per year.

“It opens up the trading space a bit more because Wilmar will not be sourcing all their sugar from Raízen anymore,” said a source at a Europe-based sugar trader.

Raízen, a 50-50 joint venture formed by Brazil’s Cosan SA and Royal Dutch Shell Plc, is Brazil’s top sugar and ethanol producer, as well as one of the three largest fuel distributors in the country.

Earlier this week, Raizen was the largest deliverer against the expiration of ICE’s July raw sugar contract, with near 200,000 tonnes, while Wilmar was a receiver of part of that sugar, according to sources.

Traders wondered why both companies were using the exchange’s system to move sugar when they had a joint trading venture.

Reporting by Marcelo Teixeira and Maytaal Angel; editing by Jonathan Oatis