The white sugar premium is expected to remain strong till the end of third-quarter due to tight market supply, an executive from Dubai-based Al Khaleej Sugar, the world's largest refinery, said on Wednesday.

"In my opinion I still foresee a shortage in whites till the end of the third quarter this year, that's what's going to keep the premiums strong," Cyrus Raja, Al Khaleej corporate affairs general manager told Reuters in a telephone interview.

Strong demand from Pakistan is also causing premium to be affected, Raja added.

"We are seeing extraordinary demand from Pakistan these days, with huge orders taking place and I expect that India will also start to order large amounts," he said.

Pakistan announced plans to purchase 75,000 tonnes of white sugar at $591 per tonne, cost and freight, in a tender opened on Saturday.

Dubai-based Al Khaleej has a production capacity of 1.5 million tonnes of white sugar per year, and is operating at full capacity, said Raja.

"Other demand hubs this year are Sudan and Iraq and since the price of sugar has dropped a lot of countries are taking advantage of this situation and buying right now."

ICE May raw sugar was up 0.28 cents or 1.7 per cent at around 16.74 cents a lb on Wednesday.

London August white sugar was up $2.4 or 0.5 per cent at around $492.10 per tonne at 1020 GMT.

With this premium set to stay favourable, sugar producers are more likely to add new refining capacity, especially as the global economy emerges from the financial crisis that choked off access to credit and plunged much of the world into recession.

Al Khaleej plans to raise output from 1.5 million tonnes of white sugar per year to 2 million tonnes and also boost its raw sugar storage capacity by 50 per cent to 1.5 million tonnes by the end of 2010. – Reuters