Increases in sulphur Q3 contract agreements on balanced market

08 July 2011 15:02  [Source: ICIS news]

LONDON (ICIS)--More third-quarter sulphur contracts have been settled at an increase of $10-20/tonne (€7-14/tonne) in Brazil, Canada and northwest Europe due to balanced supply-and-demand fundamentals, buyers and sellers confirmed on Friday.

However, quarterly and half-yearly contract discussions elsewhere have seen minimal progress due to a large gap in price proposals as buyers in China – the largest sulphur import market – tactically reduced their buying during the negotiation period.

Brazil’s mining and fertilizer giant Vale has confirmed agreeing to third-quarter contracts with the majority of its suppliers, including Russian gas exporter and sulphur producer Gazprom Export.

Finalised prices for Russian product are understood to be close to $250/tonne CFR (cost and freight) Santos, up from $230-240/tonne CFR for the second quarter, according to an official of Gazprom Export.

Some third-quarter contracts have been concluded at around $235/tonne FOB (free on board) Vancouver, one Canadian sulphur supplier said. The price is understood to be applicable to the Brazilian market. Second quarter contracts were fixed at $220-225/tonne FOB.

For northwest Europe, contracts for the third quarter are beginning to settle at $220- 230/tonne delivered, confirmed by both buyers and sellers. Compared with the second-quarter’s $205-230/tonne delivered, the range has narrowed.

Delays in new projects which add sulphur production capacity and increased sulphur demand from new metal-leaching projects have kept the sulphur market balanced this year.

The situation is less clear in the Middle East. The majority of international traders remain in talks with producers, resisting initial proposals of $225-230/tonne FOB because the implied delivered level is above $255/tonne CFR China – currently unworkable in the spot market.

Major Chinese end-users are delaying their sulphur purchases amid contract talks, despite having relatively low stocks of 1.42m tonnes. They are understood to be targeting less than $200/tonne CFR for the third quarter.

Traders discussing quarterly contracts with Saudi Aramco have not yet received price proposals from the sell side. Aramco exported 76% of its total supply to China in 2010 and relies heavily on Chinese demand. Hence it has adopted a wait-and-see approach amid an expectedly long negotiation period.

Abu Dhabi National Oil (Adnoc) has agreed some quarterly contracts with traders, a source close to Adnoc said. This has not been confirmed by the buying side. Prices are rumoured to be $210-225/tonne FOB.

Kuwait Petroleum (KPC) has concluded some quarterly contracts at close to $220/tonne FOB, a KPC source said. However, this has not yet been confirmed by the buying side.

Tasweeq in Qatar is understood to have agreed some formula-priced contracts for the third quarter with traders.

In North Africa, phosphate fertilizer producers have yet to reach an agreement on half-yearly and quarterly contracts with major sulphur suppliers due to a big gap in price proposals. Russian producers have tabled $245/tonne CFR with Middle East producers at an even higher at $265/tonne CFR.

Office Cherifien des Phosphates (OCP) in Morocco is reported to be targeting $235/tonne CFR. Price ideas from Groupe Chimique Tunisien (GCT) in Tunisia are understood to be much lower, with GCT citing low phosphates production rate as a result of continuous strikes at its mine and plant.

First-half 2011 contracts for granular sulphur were agreed at $170-180/tonne CFR North Africa.

Already in the second week of July, many expect this negotiation period to be long and delayed.

Sulphur is a raw material used for phosphate fertilizer production as well as sulphuric acid used for metal leaching.

For more on sulphur, visit ICIS pricing fertilizers

By: Freda Gordon
44 208 652 3214

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