Sulphur shortages bring phosphate headaches

18 January 2008 15:16  [Source: ICIS news]

LONDON (ICIS news)--Shortages of key raw material sulphur have become a problem for leading phosphate fertilizer producers, with forays into the spot market in evidence and warnings of reduced production, market sources said on Friday.

Continued strong sulphur demand in China and India, combined with expectations of lower exports from Canada, the Middle East and the Former Soviet Union (FSU) this year, have caused the sulphur market to tighten significantly.

This comes at a time when demand for finished fertilizers is also high and producers are wanting to make the most of a lucrative market.

US and North African diammonium phosphate (DAP) prices were currently both assessed at $710-720/tonne (€483-490/tonne) FOB (free on board), up from around $260-270/tonne FOB this time last year, according to ICIS pricing.

Moroccan producer Office Chérifien des Phosphates (OCP) this week indicated that its January DAP exports would be severely curtailed, possibly by as much as 50% of normal levels, due to a lack of sulphur.

OCP also warned phosphoric acid customers that shipments could be significantly reduced in early 2008 also due to sulphur supply problems.

Although OCP had signed supply contracts with traditional suppliers, volumes have been reduced due to lower production this year.

Tunisia’s Groupe Chimique Tunisien (GCT) had also been unable to cover its sulphur requirements through contracts and had been forced intothe spot market.

Market sources reported that GCT purchased three cargoes of Russian sulphur from trader Fedcominvest at $550-570/tonne CFR (cost and freight), prices over $100/tonne higher than at what level it settled first half 2008 contracts.

Meanwhile, sulphur supply in the US was also very tight. This week saw a firm freight enquiry from trader ICEC to ship 30,000 tonnes of Russian sulphur from the Black Sea to Galveston, Texas, on the US Gulf coast.

It is understood that the sulphur would be melted in Galveston and then shipped to Tampa, Florida, to an as yet unnamed US phosphate producer.

Additionally, there was also a fixture for 14,000 tonnes of sulphuric acid from India to Tampa for mid-January loading. The buyer was also believed to be a US phosphate producer.

Given the margins currently enjoyed by US phosphate producers, sources said they could well afford to import some cargoes of expensive sulphur and sulphuric acid if it meant they were able to continue running their plants at full stream.

US phosphate producers are currently paying less than half of international market values for domestic liquid sulphur. First quarter prices were agreed around $250/long ton CFR Tampa, while spot sulphur prices in the Black Sea were assessed around $520-530/tonne FOB.

($=€0.68)

By: Rebecca Clarke
+44 20 8652 3214

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