New Orleans, April 8 - U.S. refineries have enough room and staff to process sugar this year following a February explosion that left Imperial Sugar Co.'s (IPSU) Savannah, Ga., plant - the U.S.'s second-biggest cane refinery - closed for now, industry members said.
Imperial's Georgia facility provided nearly 15% of U.S. cane refining capacity when a Feb. 7 fire, blamed on ignited sugar dust, killed 13 people. That accident spurred the Occupational Safety and Health Administration to inspect hundreds of plants where combustible dust is a worry.
Imperial, meanwhile, said it intends to get its Savannah plant rebuilt to code and running again.
"Savannah was producing 800,000 tons a year. We hope to have the plant back in bulk- and limited-packaging production by the end of the calendar year - with restoration of full-packaging capacities in 18 to 24 months," Imperial Sugar Chief Financial Officer Hal Mechler told Dow Jones Newswires this week.
Most of the raw sugar handled at Savannah was imported, but some of it came from Florida cane growers.
During recent OSHA investigations, part of Imperial's Gramercy, La., plant was temporarily shut in March after the agency finedthe company $36,000 for inadequate dust-collector equipment and improper sugar storage.
Mechler said that only Gramercy's powdered-sugar production, providing 7% of the plant's revenue, has been suspended. In late March, Imperial said it planned to begin removing potentially combustible dust at the Louisiana powdered operation.
Plenty of Capacity to Spare
U.S. sugar refineries as a whole were operating at about 80% of yearly capacity before the Savannah explosion, said Jack Roney, economics director at Virginia-based American Sugar Alliance, representing growers and processors.
Assuming normal, U.S.-wide, refinery operations at about 312 days a year, he pegged the nation's capacity at 6.6 million short tons, raw value, with cane-refinery, capacity demand at 5.38 million short tons, leaving 1.22 million tons unused at the time of the Georgia fire.
Roney said "loss of production at Savannah is estimated at 700,000 tons if they're down for a full year."
Imperial's figure for full-year output at that plant is higher, at 800,000 tons, Mechler said.
Roney said "other refineries can make up for Savannah, with over 500,000 tons to spare. And this assumes just an increase in operating days to the normal 12 days on, two days off, for 312 days a year. If necessary, refineries could increase their operating schedule to 13 on, one off, for 340 days a year."
"We still firmly believe that domestic supplies of sugar are adequate and that no increase is needed in imports or in the domestic overall allotment quantity," or OAQ, Roney said.
Under the U.S. government sugar program, the OAQ is estimated U.S. sugar consumption plus reasonable ending stocks, minus beginning stocks and imports during a crop year.
Domino Ramps Up; US Sugar Corp. Focuses On Own Cane
Brian O'Malley, president of Domino Foods in Iselin, N.J., said his company has stepped up production to process much of the sugar that was previously handled by the Savannah plant by running plants nearly full tilt on a 12-day-on, two-day-off schedule.
He and Donald Brainard, vice president of Domino's parent company, American Sugar Refining, Inc., said plants in Baltimore, Yonkers, N.Y.; Chalmette, La. and Florida, along with the company's C&H plant in California, have all picked up their paces to handle extra business. O'Malley said Domino and Imperial had many of the same big, commercial customers before the Savannah explosion. The decision about which Domino plant handles an Imperial client's business depends on a plant's products and the location of the customer.
Brainard said Domino has "a national footprint, which was the intention of acquisitions that were made, so that we're able to serve every region of the country."
Domino itself suffered a recent industrial accident. O'Malley said the cause of an early November explosion at the company's Baltimore plant was a mechanical failure in one of the mills producing confectioner's sugar. One worker was injured with a hand burn and some production was lost, but the Baltimore plant made repairs and managed to resume operations quickly, he said.
Brainard said Domino employees are trained in "housekeeping" and on the alert for dust accumulation to keep accidents to a minimum.
Dust explosions are fairly common across U.S. and foreign food, paper, petrochemical and pharmaceutical industries, according to scientists. In the refining process, a sugar dust cloud can develop and then be ignited by heat and oxygen.
All of Domino's sugar comes from cane. Domino's Baltimore and Yonkers plants are supplied by Florida and other nations. The company's Chalmette refinery, similar in size to Baltimore, processes sugar from Louisiana and Texas. The C&H plant in Crockett, Calif. uses sugar from Hawaii and imported raws.
Meanwhile, U.S. Sugar Corp. in Clewiston, Fla., is concentrated on processing the company's cane crop and isn't handling any sugar at this time that would have been processed by Imperial, U.S. Sugar spokeswoman Judy Sanchez said.
U.S. Sugar provided the most-recent addition to the nation's refining capacity, although that was some time ago. In late 1998, the company opened a new cane refinery in Clewiston, the first built in the country in 25 years, to house refining, packaging and warehouse operations.
New capacity is in the works in Louisiana now, however, with Cargill Inc. and SUGAR Growers and Refiners Inc., teamed to break ground on April 15 on what should be the nation's largest refinery.
Prices Remain Moderate After Accident
Roney said tepid domestic sugar prices reflect the adequacy of capacity after the Savannah accident.
"Raw cane prices are low and still within the loan forfeiture range, while refined prices are up only slightly, barely above the loan forfeiture range and quite stable," he said.
U.S. supplies are controlled by the U.S. Department of Agriculture, through marketing allotments on producers and tariff quotas for more than 40 exporting countries. Under the program, intended to operate at no cost to taxpayers, processors receive non-recourse loans, allowing them to use sugar as collateral. If the market price drops below the loan rate of 18 cents a pound for raw cane sugar and 22.9 cents a pound for refined beet sugar, processors can forfeit sugar in loan repayments or can repay the government at a reduced rate.
Raw cane sugar prices in the ICE Futures U.S. No. 14, or domestic market, in New York reached 20.85 cents a pound in early March but have since fallen back to 20.20 cents, basis the May contract, on Tuesday.
Meanwhile, U.S. growers worry Mexico's industry sees Imperial's problems as an opportunity to sell more sugar across the border under the North American Free Trade Agreement.