Saudi Aramco unwilling to lower Q1 sulphur prices any further

17 January 2012 13:12  [Source: ICIS news]

LONDON (ICIS)--State-owned Saudi Aramco will price its sulphur for the first quarter at a premium over Kuwaiti products despite weaker spot prices, a source with Aramco’s subsidiary trading company said on Tuesday.

The trading company, Aramco Trading, has not yet and is not in a hurry to conclude prices for any sulphur contracts for the first quarter with customers, the source added.

Another Middle Eastern producer, Kuwait Petroleum Corp (KPC), settled first-quarter contracts earlier in January in a $170–180/tonne (€134–142/tonne) FOB (free on board) range.

Coupled with continuously weakening demand and spot sales, Aramco Trading has faced lower price bids from customers, from in the $180s/tonne in late December to more recent indications of $160–165/tonne FOB.

“KPC’s position in the Arab Gulf is different from ours, and that could be proved in Saudi contract prices that were always higher compared to Kuwaiti product,” the source said.

Due to berth and vessel size restrictions and a slow loading rate at Shuaiba in Kuwait, KPC sulphur is often sold at a lower FOB level, with higher freight costs entailed, said the source.

“One has to also realise that Aramco Trading has a lot more sulphur to offer, and we have more flexibility to place our tonnes around the world.” 

It is estimated that close to 3m tonnes of sulphur were exported out of Saudi Arabia in 2011, compared with around 800,000 tonnes from Kuwait.

According to its term buyers, Aramco Trading has lowered its price offers to the mid/high-$180s/tonne FOB, from around $190/tonne FOB, to acknowledge declining spot prices.

However, the trader is unwilling to lower its price ideas further despite the latest spot sale into India concluded at a netback in the high-$150s/tonne FOB Middle East.

“It is unfair to compare the sale of a distress cargo to quarterly contracts,” the source added.

The negotiation period has been delayed by the year-end holiday season, and the upcoming Lunar New Year holiday is likely to prolong the period.

“This could well be dragged into February, but we are in a comfortable position as there are clauses in contracts that cover the negotiation period.” The source said this means the company has no pressure on stocks as contract holders continue to lift some cargoes.

Aramco Trading has also received a lot of spot inquiries from both contract and non-contract holders, testifying to its comfortable position, said the source.

Aramco Trading, replacing Saudi Aramco’s product sales and marketing department, began operating on 1 January 2012. The trading company markets all of Aramco’s refined products, and intends to trade sulphur from other regions in the near future.

The week-long Lunar New Year holiday begins on 22 January.

($1 = €0.79)

For more on sulphur visit ICIS pricing fertilizers

By: Freda Gordon
44 208 652 3214

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