China sulphur demand cooling off

29 February 2008 13:52  [Source: ICIS news]

LONDON (ICIS news)--Sulphur demand from key buyer China has cooled off in the face of high prices, bad weather, holidays and the government’s ban on the movement of diammonium phosphate (DAP) to the ports for export, market sources said on Friday.

International sulphur prices have risen rapidly over the past few months, driven mostly by strong demand from Chinese buyers facing a reduction in volumes from international suppliers this year.

Sulphur was on offer from Chinese traders at ports at around $590/tonne (€389/tonne) CFR (cost and freight), but Middle East cargoes were on offer at $670-680/tonne CFR for new sales.

Spot prices in China were assessed around $550/tonne CFR at the start of this year.

However, buyers were very reluctant to pay these new higher levels as a number of factors had combined, not least the higher prices, to ease demand.

The recent Lunar New Year holidays and bad weather have meant that sulphur stock levels have built up at the ports.

Additionally, during the bad weather phosphates producers were forced to cut output due to a lack of electricity and had also built up sulphur stocks at their plants.

This week’s decision from China’s National Development and Reform Commission (NDRC) to ban the rail movement of phosphate fertilizers from the plants to ports until the end of April, which has effectively banned the export of DAP, had also impacted sulphur demand.

This decision was pushing all phosphates production towards the domestic market to avoid a potentially disastrous shortage. However, phosphate producers were unable to pass on higher sulphur costs to the lower priced domestic market.

Domestic DAP prices were currently in the mid-$570s/tonne ex-works.

Suppliers, however, were confident that Chinese spot demand would return. They noted that the stocks at the ports and plants would be used up quickly now that the holiday season was over and bad weather had cleared.

Sources commented that while price appeared to be a sticking point at the moment, sulphur demand would remain strong in order to provide the domestic market with sufficient phosphate fertilizer for the spring season.

China is the world’s largest sulphur buyer, importing 9.6m tonnes in 2007 up from 8.8m tonnes in 2006 and 8.3m tonnes in 2005.

($1 = €0.66)

By: Rebecca Clarke
+44 20 8652 3214

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