OREANDA-NEWS. February 11, 2015. Spot raw sugar prices jumped to a premium over forward contracts for the first time since November 2013, as Chinese refiners scooped up more lower-priced foreign material, tightening nearby supplies and potentially roiling long-term stockpiling deals.

Spot March contracts on ICE Futures US rose as high as a 0.18-cent premium over the May contract on Tuesday after the March/May spread inverted on Monday, even as the global market remains awash with sweetener.

After three straight weeks of steep price declines, buyers in China, the world's second-biggest sugar consumer, are booking imports of raw sugar from Brazil in favor of buying higher-priced domestic material, driving the spot price higher, traders say.

"Even though there is stock available in Brazil, any stock that is available is actually committed already," said Bruno Lima, manager for sugar and ethanol at INTL FCStone in Campinas, Brazil.

"Of course there might be other buyers, but the biggest one is China and that's all you have at the market," Lima said. Even though index funds are heavily selling the March/May spread ahead of the March contract's expiry on Feb. 27, short-covering has also helped lift the spread to a premium, traders said.

Many traders expect the backwardation, meaning the nearby contract is more expensive than later-dated contracts, to be short lived as the global market remains awash with sugar due to bumper crops from top grower Brazil.

Beyond May, the contango returns: March 2016 prices closed at a 1.37-cent premium to May 2015 on Tuesday.

Still the disappearance of the year-long carry is likely to raise to concerns about the extra costs of holding inventory for refiners, which are already struggling with squeezed margins.

They have taken advantage of the year-long wide forward contango by hoarding big stockpiles of raw sugar. Earlier this month, Dubai's Al Khaleej Sugar Refinery said it had 1.5 million tonnes of raw sugar, either stockpiled at the refinery or on its way to the refinery, enough to meet its demand until the end of 2015.

Refiners' margins are already under strain as the spread between raw sugar prices and their finished refined product has narrowed to 59 cents, hovering above the lowest levels since 2009.