Congestion in Thai ports and problems with river transportation forced trading houses to find alternative routes to ship sugar, allaying fears of a build up in stocks as domestic output hits record this year, industry sources said.

Cargo clearance at Bangkok Klong Toei Port has slowed because of the temporary closure of some wharves, which will last until late this year, forcing ship operators to slap congestion surcharges on cargo firms.

On top of that, a giant barge carrying 2,400 tonnes of sugar capsized in the Chao Phraya last week and the authorities took more than a week to clear the vessel. That completely cut off transport along a major sugar transportation route bringing sugar from millers in the north to Bangkok port.

But dealers said the situation had improved, with many exporters switching to an alternative eastern port.

"A lot of sugar has been shipped out and everything is now flowing well as most of us have switched to Laem Chabung port," said Uthai Asadatorn, executive director of Thai Roong Ruang Group, Thailand's second biggest sugar miller.

The second port is 130 km (80 mile) southeast of Bangkok.

Uthai said around 70 percent of sugar exporters had already moved to Laem Chabung port to avoid the congestion in Bangkok.

"The situation is likely to ease now and the problem should be over completely by October as I think we'll have very little sugar left for sale by then," said a Bangkok-based trader.

Physical dealers said the congestion barely affected the premiums for Thai sugar, which were under pressure from a pick up in cane crushing in top producer Brazil and the prospects of more exports from India.

Thai raws for high polarisation, or hipol, variety, were offered at premiums of 210 points above New York's July contract , down from as high as 250 points last week, although some sellers were still adamant to put the value at 230 to 240 points.

A dealer in Singapore who trades Thai sugar also said the situation was under control.

"A lot of sugar is still flowing. The bigger boys have their logistics supply chain providers in-house. They have found different routes to get into the container loading port," he said. "They seem OK. It depends on which inland container depot you're talking about, which terminal they are using. From what I heard so far, it's under control. From what I heard, it's not that bad, but they may be downplaying it."

Record Volume
Traders said traffic would have been busy anyway right now because demand is strong and Thailand has a record high sugar surplus to sell, so boats were lining up to load.

Thailand is the world's second-biggest sugar exporter after Brazil. It has produced a record 9.62 million tonnes of sugar in the current 2010/11 crop, of which around 7 million tonnes was expected to be available for export in 2011, also a record high.

Exports have risen so far this year, helped by demand from new markets such as Russia plus the European Union, which Thailand rarely sells sugar to.

From January to May, Thailand exported 3.2 million tonnes, up around 20 percent from the same period last year when it shipped 2.7 million. (Reuters)