International sulphur demand damaged by price uncertainty

11 March 2014 17:46 Source:ICIS News

LONDON (ICIS)--Sulphur demand is showing signs of easing in some sectors of the international market because of price uncertainty, with April purchase tenders also having been cancelled, sources said on Tuesday.

In the key China market, buyers have retreated to the sidelines since prices started to slide for the first time since September 2013.

“The world is watching China and buyers are now asking for sub $200/tonne [cost and freight],” said an international trader.

According to sources, domestic demand in China is down and lower offers are failing to attract any buying interest. Indeed, a liquid cargo was reported on offer at $170/tonne CFR (cost and freight), but this failed to attached any buying interest.

This is in contrast to offers of imported cargoes from the Middle East at $230-240/tonne CFR China. In addition, a 40,000 tonne Iranian cargo is reported to be arriving in China in approximately five days, which could soon turn into a distressed cargo since there are no buyers.

The ruffled pricing sentiment in China has been further compounded by Saudi Aramco’s announcement that it is to drop its April monthly price by $10/tonne.

A sulphur trader stressed that the downward price trend was not the start of a “market crash”.

“It made sense for Aramco to go back – at some point there was a disconnection from the FOB (free on board) level and the CFR level.

“CFR was running ahead of FOB, then FOB was catching up. We don’t expect a crash or anything - it’s healthy for the market to stabilise,” the trader said.

The Aramco April contract price follows March contract price announcements from other major Middle East producers, Untied Arab Emirates (UAE) ADNOC (Abu Dhabi National Oil Company) and Qatar's Tasweeq, which increased their March prices by $20/tonne and $33/tonne, respectively. 

Because Aramco has dropped its April price, there is speculation in the sulphur market that ADNOC and Tasweeq will now reduce their April prices.

“The Chinese end-users have played their hands very carefully - showing that they can resist the price increase. It’s a game to see who losses hold of the rope first and the producers have lost their nerve,” said another trader.

Further afield, Brazil-based mining company Vale has cancelled its purchase tender for 30,000-40,000 tonnes of sulphur for April loading because offers were too wide and time frames could not be met.

Also, sources believe Fertilisers and Chemicals Travancore Ltd (FACT) has scrapped a purchase tender for 15,000-25,000 tonnes of sulphur for April arrival in Cochin, India. The tender closed at 14:30 IST (India Standard Time) on 11 March and offers were requested to remain valid until 18:00 IST on 17 March.

“FACT I think cancelled [the tender] yesterday. It's clear that from April the prices will dip by about $25/tonne. FACT will check if they are getting cargo at $200/tonne CFR - if they don't get $200-205/tonne CFR level - they will cancel,” said an Indian trader.

Demand for sulphur is soft for the downstream fertilizer sector in India as the market approaches its financial year end on 31 March and buyers and sellers attempt to close it with minimal inventories.

By Julia Meehan