Sulphur market divided over $200/tonne CFR China viability

18 July 2014 12:41 Source:ICIS News

LONDON (ICIS)--The international sulphur market is rather split in terms of whether prices in the key China market have peaked or if they have further room to increase following recent higher prices from Middle East producers, sources said on Friday.

Spot prices in China, a major importer of sulphur, are currently at $160-185/tonne CFR (cost and freight) China.

“I think that there is some stagnation at the high $180s/tonne in China, but I think this current lull is temporary,” said a trader dealing in both the Asian and European sulphur markets.

“Stock holders at the ports are not relenting to end-user pressure and only selling small quantities,” the trader added.

Stocks at the major nine ports in China dipped by 3% week on week.

When discussing the local situation in China, a domestic source said: “Of course, the phosphate market is better so the sulphur market has basic support. No matter how confused the market is now in China,  as long as there is no extra unconventional risk, the market still has a chance to rise a little, but the space is narrow.”

A number of sources stress that any price ideas even at $190/tonne CFR (cost and freight) China are purely based on Middle East FOB (free on board) prices of $166-170/tonne FOB for the export market.

“These prices of $190/tonne and $200/tonne are Middle East based, it’s not the reality. Why would downstream producers pay $200/tonne for sulphur? It will eat [phosphate producers'] margin,” said an international trader.

Sulphur demand is not booming in China and port inventories are being kept at a steady level, but there are some sellers who believe that demand and subsequently prices will start to pick up again ahead of the rabi season in India.

“Demand will start to come back in China for rabi and for Chinese domestic demand. The market is growing and I think we will see $190-195/tonne CFR China very soon,” commented a supplier of sulphur to China and North Africa.

When talking about recent price developments in the Middle East and China, another supplier based in Japan and selling to local markets said: “Chinese companies can't accept these higher prices in fertilizers. India will start to purchase DAP (diammonium phosphate) in August. DAP demand from America will end in July and after that Chinese DAP demand will increase. It’s all a bit of a mess.”

Low rain falls in India and the lack of upward price pressure for phosphates remains a key talking point among industry players especially since it is a determinant for the direction of sulphur prices. Unlike other global commodity prices that are largely supply and demand driven, sulphur is an involuntary material.

The major rabi crop in India is wheat, followed by barley, mustard, sesame and peas. The rabi season starts with the onset of north-east monsoon in October. India's agriculture is dependent on the monsoon.

In India, cumulative rainfall for the country as a whole during this year’s monsoon (1 June–9 July) has so far been 43% below the Long Period Average (LPA), according to the Indian Meteorological Department (IMD).

There are expectations that the monsoon will improve in central and northwest India this week, although there are still concerns about a possible drought-like situation.

The southwest monsoon accounts for around 70% of the country’s annual rainfall and is the main source of irrigation for the country’s farmers.

Belle Zhang and Deepika Thapliyal contributed to this story

By Julia Meehan