(Includes details of decision, context on sugar market)
By Marcelo Teixeira
SAO PAULO, Oct 3 (Reuters) - Raízen, Brazil’s largest sugar and ethanol producer, will temporarily close the Bom Retiro mill in Sao Paulo, the country’s leading cane producing state, the company said on Thursday.
Raízen, a 50-50 joint venture between Cosan SA and Royal Dutch Shell Plc, said the decision would allow the company to optimize operations in the Piracicaba production cluster. It said the closure would not impact cane processing projections, since it would divert the cane to be crushed at nearby mills in the region.
It is the second time Raízen hibernates the Bom Retiro mill, located in the municipality of Capivari. The installation was shut down in 2015 due to low cane availability after a drought, and was reopened in 2017.
The decision happens amid low global sugar prices, despite a price reaction in New York raw sugar contracts in recent sessions as the market expects the global sugar supply balance to swing to a deficit in 2019/20 after two years of large surpluses.
Sugar was down almost 1% on Thursday on New York’s ICE to 12.77 cents per pound.
Bom Retiro is one of the smallest of the 26 plants Raízen operates in Brazil. The company projected total cane crush of between 61 and 63 million tonnes in the 2019/20 season, which runs through the end of November or early December. Raízen processed 59.7 million tonnes in the previous season.
The company said most of the workers will be reallocated to other facilities. It did not say how many were laid off, but said it negotiated a compensation package with the local union.
Reporting by Marcelo Teixeira; Editing by Edmund Blair and Andrea Ricci