09 December 2011 16:12 [Source: ICIS news]
LONDON (ICIS)--Sulphur suppliers are to face lower price proposals from the buy side for first-quarter and first-half 2012 contracts because of weak global demand, market sources said on Friday.
A new round of contract negotiations will officially begin before the end of December, with Brazilian and northwest European buyers taking the lead and already in initial price discussions. Early indications are pointing to a long negotiation period due to huge differences in price ideas.
In the fourth quarter, demand in major sulphur import markets has been slow due to weak downstream sulphuric acid and phosphate sectors, further hampered by an uncertain global economic outlook.
Most global major end-users have direct contracts with sulphur suppliers. In the largest import market, China, traders also play an important role in re-distributing sulphur, mostly sourced from the Middle East.
Many traders have suffered losses due to weakened CFR (cost and freight) prices in the second half of 2011. In light of this, some traders say that a break-even price for the first quarter of 2012 will be in the $180s/tonne (€130s/tonne) FOB (free on board) Middle East.
“If China CFR prices are at around $215/tonne CFR, with freight around $30/tonne, the break-even cost is really at $185/tonne FOB Middle East. But suppliers may not accept that,” one Japan-based trader said.
For the fourth quarter, most Middle East supply contracts were settled in the $210-220/tonne FOB range.
“I’m not going to consider anything higher than $185/tonne FOB,” a China-based trader added. “But Middle East producers are usually aggressive with their prices.”
Middle East producers have acknowledged recent spot price drops in the market. Many expect lower price proposals but are unlikely to drop theirs by much, citing tight market fundamentals and an expected pick-up in Chinese demand when its spring fertilizer application season begins early next year.
“Suppliers will push above [buyer price ideas], as we also expect the market [demand] to improve in February and March,” according to a Middle East producer.
Other major sulphur export markets, including Canada and the Black Sea, will face similar price proposals.
“We have not started talks yet. I’m not overly concerned about [recent price drops] because Canadian supply is not going up in 2012,” a Canadian supplier added.
($1 = €0.75)
For more on sulphur visit ICIS pricing fertilizers
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