Flames Engulf Brazilian Port Terminal

Fire on Friday destroyed most of the infrastructure at Copersucar's sugar terminal in Brazil, one of the biggest in the world, likely putting 10 million tonnes of export capacity offline for up to six months until repairs are made.

Santos port authority Codesp, which manages day-to-day operations at Brazil's main port, said the fire started in the conveyor system, which transports sugar through Copersucar's warehouses, around 6 a.m. Brasilia time (0900 GMT).

The fire, which subsequently spread through all of Copersucar's warehouses at its terminal after up to 300,000 tonnes of sugar ignited, has been contained from spreading further by firefighters but would likely burn for another two days, Codesp said.

"A conservative estimate would be six months to get this in operational form (again)," said a U.S. trader. "The jewel in their crown has been effectively destroyed."

The disaster added one more obstacle in the tortuous path that Brazilian agricultural products must take to global markets. Slow trucks, scarce rail transport and overcrowded ports already undercut the profitability of Brazilian sugar and grains production and cause bottlenecks for commodity markets.

Copersucar says nearly a fifth of the world's seaborne sugar trade flows through its trading desks.

ICE March raw sugar prices rose more than 6 percent to a one-year high on news of the fire, before paring gains. By 1400 ET the contract was up 3 percent at 19.58 cents per lb.

Copersucar officials said they had no additional information about the cause, containment and damage of the blaze beyond what the fire department and port authority Codesp have reported.

Analysts at investment bank Credit Suisse said the destruction of the terminal infrastructure would not only affect short-term deliveries but would "also cause a disruption in Copersucar's loading operations in the next 3-6 months."

The fire did not affect terminal operations at other sugar exporters in Santos, such as Cosan SA, Sao Martinho SA or Noble.

Television footage showed a three-story high mountain of sugar engulfed in flames inside a warehouse that had lost most of its siding and roof to the flames.

Some of the overhanging conveyor belts that transport sugar between the warehouses and eventually to waiting ships appeared to have toppled over or were lying on the pavement alongside some of the warehouses.

Brazil is at the tail end of a record 585 million tonne center-south cane harvest that is expected to produce 34 million tonnes of sugar. Roughly 15 percent of the crop remains to be crushed.

In June, Copersucar inaugurated an expansion project at Santos that doubled its export capacity to 10 million tonnes a year.

Copersucar represents 47 sugar mills in Brazil and recorded revenue of $4.1 billion in 2012. The company had hoped in June to expand its annual trading volume to 9 million tonnes from 7.2 million tonnes in 2012.

When large stockpiles of sugar catch fire, it can be extremely difficult to extinguish it quickly. As the sugar burns into the center of the mound it creates a carbonized outer shell that inhibits the penetration of water and chemicals that would otherwise snuff out the blaze.

Firefighters will also have the challenge of dealing with subterranean passages that connect some of Copersucar's warehouses through which sugar is transported.

Fabrienne Pointier at data provider Platts said the loss of the large volume of sugar is not as bad as the damage the fire has done to Copersucar's infrastructure at Santos.

"The real significance is that it is going to slow down the logistics. It's going to be many months to rebuild those warehouses," Pointier said.