Sugar Terminals Limited severs ties with Queensland Sugar Limited in shock move
Industry leaders have reacted to Sugar Terminals’ decision to sever ties with Queensland Sugar limited, with some saying the controversial move has ‘little justification’ and has left growers in the dark.
Mackay
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In one swift “corporate manoeuvre”, Queensland canegrowers fear they have lost influence over one of the world’s largest bulk raw sugar export terminal systems.
Sugar Terminals Limited, which owns six sugar export terminals, has effectively sacked Queensland Sugar Limited from operating its terminals, severing a 20-year business relationship.
And the surprise break-up, which will become official on June 30, 2026, has not been amicable.
Speaking on behalf of the company, STL chairman Mark Gray said the move to insource its bulk sugar terminal operations in Cairns, Mourilyan, Lucinda, Townsville, Mackay and Bundaberg was about increasing efficiency, reducing costs, and removing the clear conflict of interest it had with QSL, its biggest customer.
Canegrowers chairman Owen Menkens said he believed STL’s move appeared “to be more about corporate manoeuvring”, while QSL CEO Greg Beashel said they were “disappointed” about STL’s “vague” justification.
Any profits QSL made from running the terminals, as a not-for-profit business, returned to the state’s sugar industry with eight mill owner members including Mackay Sugar Limited, which owns three mills across the Mackay region.
Public company STL states on its website it is “owned by more than 4900 Queensland sugar industry grower and miller shareholders”, but the only way to verify who owns what is witnessing the shareholders list.
“STL must consider the full transitional costs for shareholders, as well as the loss of the considerable ongoing savings and benefits delivered through QSL’s not-for-profit status,” Mr Beashel said, adding QSL had operated on a “cost-recovery-only basis”.
STL has subleased terminal operations to QSL since 2000, but there have been telltale signs the 22-year business relationship had soured, especially since 2017.
That was the year internal changes occurred at STL amid “significant challenges” facing the sugar industry, including the deregulation of raw sugar marketing arrangements.
STL’s 2022 AGM notice states its new business model would include a strategy to diversify income streams to thrive against “increasingly competitive and volatile international markets”.
Mr Gray has since said a key element of the new model was revising storage and handling agreements with six customers, as well as creating a new operating agreement with QSL, its largest SHA client.
“The impact of these changes … has been profound and ongoing,” Mr Gray said at his October 26 AGM address.
“We now have a very different industry dynamic, with aggressive competition between marketers to attract growers from each other and gain a business advantage.
“This has meant changed roles, as well as new allegiances and loyalties … some of the most contentious issues have involved marketers trying to gain an advantage over each other for the benefit of their growers – not necessarily for the benefit of industry as a whole.”
Mr Gray continued the sugar industry had “in the last five years” faced pressure from India’s dumping of sugar, extreme weather, “escalating geopolitical tensions”, “supply chain dislocation and resource shortages”, rising inflation and interest rates, and the “very real threat of a global recession over the next one to two years”.
He said STL made “no apologies” in applying “relentless pressure” on QSL to “ensure costs are competitive”, which had led to “some (healthy) tensions in the relationship”.
The relationship has now ruptured.
STL walks away from the pairing with total control of millions of tonnes of sugar exports per year, or about 42,360 trucks and 41,800 trucks-worth of sugar.
It remains to be seen what dividends this will return to shareholders but share price growth is 20 per cent since STL implemented its new model in 2017, after which it became “hands-on” and “contracting directly … with multiple customers”.
“As the (terminals) asset owner, STL already meets all operating costs, and approves and funds all capital investment, so collectively it makes sense that we operate these (bulk sugar terminals),” Mr Gray said.
He added the move also resolved the conflict of interest from QSL being both the operator and a customer, and would save costs that were incurred from the QSL Board, its executive, and more.
Mr Beashel said on behalf of QSL that they refute a termination is justified by a “perceived” conflict of interest.
“QSL has always taken our robust ring-fencing obligations seriously, which are similar to those in other industries, to ensure QSL’s operations and marketing divisions are managed and operated separately,” Mr Beashel said.
“These provisions have been extremely effective, with all independent external audits confirming compliance.”
Canegrowers Mackay chairman Kevin Borg said STL had tried but failed on previous occasions to remove QSL from terminal operations, adding he’d “argue” STL couldn’t operate terminals more efficiently.
“The Queensland terminals are well renowned for their efficiency … and it’s our competitive edge,” Mr Borg said.
“If you talk to anybody else in the world, they envy the operations of our sugar terminals.
“We have transparency in costs with QSL managing them now. If STL want to go out there and make a big return for shareholders, it’s only going to be at a cost to the industry.
“In recent times through regional meetings Mark Gray verbally promised that they (STL) wouldn’t take the operating rights away from QSL.
“Now they‘ve reversed that promise.
“If there’s not a good explanation as to why, there will be an erosion of trust.”
STL CEO David Quinn said it would continue to invest, upgrade and renew the terminals as “the custodian of assets owned by the entire sugar industry”.
Mr Quinn said STL would also offer employment to all site-based QSL operational employees on the same terms and conditions in its focus to make the “change as smooth as possible”.
“QSL is both a major shareholder and customer and STL will always seek to maintain a positive and productive relationship with the business,” he said.
“This change will enable QSL to focus on its core business of marketing sugar and pursuing its own separate strategic objectives.”
Canegrowers is calling on STL to explain how it can deliver on intentions to improve terminal efficiency while “not be(ing) distracted (to seek) alternative business models driven by a focus on shareholder returns”.
“(Growers) deserve an explanation,” Mr Menkens said.
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