Sao Paulo, June 11 - Brazil's white sugar exports via containers are set to continue rising as freight rates for break bulk carriers climb and growing imports in general raise container availability in Brazilian ports, traders said.
About half of this year's white sugar exports are expected to be shipped in containers, compared with 40 percent in 2007 and 27.5 percent in 2006, when this kind of shipment started to rise, according to traders.
"There are two basic reasons for this shift: carriers of bagged sugar are getting old, more expensive, insurance is difficult, and freight rates for containers have declined," said Carlos Franco, sugar trader at the local subsidiary of French group Louis Dreyfus (LDC).
"I think it is a definitive shift," he added.
White sugar includes a range of sugar types from refined (45-ICUMSA) up to crystal (150-ICUMSA).
Most of them are exported to Africa and the Middle East for final consumption and are normally shipped in "break bulk" carriers, where the bagged sugar goes inside the ship's hold.
Brazil is the world's largest sugar exporter. Around 70 percent of its exports are VHP sugar, which is a kind of raw sugar shipped in bulk carriers.
An increase in Brazilian imports of goods in the recent years, due mainly to the local economic growth and the strong local currency, the real, against the dollar, has raised containers availability.
In the first week of June, daily average imports were up 81 percent compared with the same month in 2007. From the beginning of the year until May, imports were 49.2 percent higher than the same period last year.
Supply of break bulk ships, on the contrary, is tightening. The world fleet is aging and many ships can no longer be insured properly, traders said. The scarcity of ships has boosted prices.
Freight rates for break bulk carriers to Africa are currently at $77 per tonne, up 120 percent from a year ago, according to Santos Associados shipping consultants.
Containers are still slightly more expensive than bulk, currently at $88 per tonne compared with $96 per tonne a year ago, but the difference is getting narrower, traders said.
Break bulk carriers transport at least 14,000 tonnes normally. Each container carries about 27 tonnes.
"There are other advantages. In containers, you can reach a larger number of importers and small ports with lower volumes, for example," said Sergio Wanderley, sugar director at Brazilian trading house Coimex, who also sees a surge in this kind of shipment for the coming years.