Little-Known Chinese Trader Buys New York Sugar in Surprise Move


Article content

(Bloomberg) — A little-known Chinese trader bought a cargo of raw sugar through the New York exchange for the first time, a move that surprised the industry dominated by a few large players.

Honors Commodity Singapore Pte. Ltd. took delivery of about 61,000 metric tons of raw sugar to settle the expiration of futures contracts on ICE Futures U.S., according to people familiar with the matter, who asked not to be named because the information is private. This is the first time that the trader, backed by the local government of China’s Hangzhou city, tapped the exchange to obtain physical supplies of sugar.

The identity of the buyer and the relatively small size of the purchase surprised traders who typically tap the exchange to take delivery of much larger amounts of sugar. While Louis Dreyfus Co. bought more than 500,000 tons — the bulk of the sugar delivery — it was the little-known Chinese firm with a trading office in Singapore that stole the spotlight.

The purchase was backed by an arbitrage strategy, according to one of the people. Honors has been building its commodities trading business in everything from metals to energy and agriculture. Its parent company, Hangzhou CIEC Group Co., is a steel and raw material merchant known for its aggressive arbitrage moves.

Article content

No one answered calls to Honors Commodity’s headquarters in Hangzhou seeking comments on Tuesday. Chinese markets and businesses are closed through Wednesday for a holiday.

The delivery could prove to be an expensive logistical nightmare if it goes ahead as planned. The amount the Chinese trader is going to receive equates to just one Panamax cargo, but the loading will take place at 3 different ports in Brazil and one in Nicaragua, according to the people and exchange data. Moving a ship from port to port to collect such small amount can be quite costly.

Traders interpreted the overall sugar delivery to settle the expired May contract as bearish, with just two buyers and some six sellers, said Bruno Zaneti, a risk management consultant for INTL FCStone Inc. in Brazil. Futures for July fell 1.5% on Monday to settle at 16.73 cents a pound.

©2021 Bloomberg L.P.