Sulphur producers target Q2 contract hikes on tight supply

25 March 2011 14:17  [Source: ICIS news]

LONDON (ICIS)--Sulphur producers in the Middle East, the Black Sea region and northwest Europe are pushing for a $40-50/tonne (€28-36/tonne) increase for second-quarter contracts because of market tightness, market sources said on Friday.

Unplanned plant maintenance, new demand from metal-leaching projects and logistics problems caused by seasonal factors have led to tight supply, prompting spot prices to trend up since first quarter contracts were settled.

In the Middle East, first quarter contracts were agreed in the $170s-180s/tonne FOB (free on board). However, current spot levels in its export market China, netting back to $190-195/tonne FOB, had already surpassed the first quarter levels.

As a result, Middle East producers were targeting $210-220/tonne FOB for the upcoming quarter, reflecting a rise of around $40/tonne.

Aramco in Saudi Arabia received contract price ideas from traders, with some proposing $190/tonne.

“[$190/tonne FOB] is too low. Our idea is in fact closer to $210/tonne FOB because the market has moved up. Our customers also realised the tightness in the market,” a source close to Saudi Aramco said.

Smooth negotiations continue at Kuwait Petroleum Corp (KPC), a source at the company said. Meanwhile, Abu Dhabi National Oil Co (Adnoc) is understood to be close to finalising quarterly contracts, targeting as high as $220/tonne FOB.

Black Sea sulphur producers GazpromExport (GPE) and Tengizchevroil (TCO) are also in the middle of finalising quarterly contracts with off-takers.

Negotiations with Moroccan buyers are taking place in the $200-220/tonne CFR (cost and freight) range, according to a source with GPE. Discussions with customers in Lebanon and Israel are also underway. First quarter granular sulphur contacts for these destinations were agreed in the $170s-180s/tonne CFR range.  

“With the Brazilians, we are close to conclusions. The price will likely be higher than [prices proposed for] Morocco,” the source added. Contract prices for the first quarter in Brazil were settled in the $190s/tonne CFR.

In Canada, suppliers reported slow progress. With market reports that some Canadian sulphur being sold into China at $230-240/tonne CFR recently, there were expectations for quarterly contract negotiations to have taken place at similar levels.

A $230-240/tonne CFR China range would net back to the low-$200s to low-$210s/tonne FOB Vancouver, which was not far from the top end of first quarter settlements, agreed in the $180-205/tonne.

In northwest Europe, molten sulphur producers are understood to be aiming for a $40/tonne increase over first quarter contracts of $165-200/tonne delivered. Some buyers had expected to accept $210-230/tonne delivered.

Sulphur buyers across the world had psychologically accepted an increase for this coming quarter. With the market continuing to tighten up, it is now down to how much of an increase sulphur end-users can take and translate to their downstream products.

Sulphur is used for the production of sulphuric acid, which is used in metal leaching.

($1 = €0.71)

For more on sulphur visit ICIS pricing fertilizers

By: Freda Gordon
44 208 652 3214

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