Sulfur Market in Brief
After a while India finally seen some spot activity as its fertilizer producer Paradeep Phosphates awarded its 40k MT purchase tender and sold an additional 20k MT to another buyer. Spot activity also stirred in South Africa, China and Turkey. Spot activity also stirred in South Africa, China and Turkey.
However, despite some spot action – regarding India, following a lull since late February - prices are still holding relatively flat on previous conclusions in most markets, which has encouraged market participants to comment that sulfur at the moment is lacking sparkle.
Yet all market participants are looking forward to third quarter contract negotiations, as well as the finished fertilizer market, to provide some guidance for the near-term market. Hence no real market moving business is expected to occur until the third quarter settlements are specified.
Active Forces in the Market
Market Outlook in Next Month
The status of pricing in the finished fertilizer sector is going to continue to influence the sulfur market price, unless any supply or demand shocks are felt in the third quarter.
Asia
China
The weak sentiment persists in China as domestic inventories continue to build and the poor finished fertilizer market influences end-user demand. In the river, bids have dropped to the mid-USD110s/MT CFR, with traders having bought heavily in April/May and now backing away from the import market as well. Offers in the river are at USD120/MT CFR, with no room to lower them further.
In the south, offers are in the high-USD110s/MT CFR against almost no bids, but there are unconfirmed reports of a south end-user having secured a 35,000MT July loading Middle East cargo in the low USD110s/MT CFR this week. A cargo of Saudi Arabian origin has been confirmed concluded in the mid-USD110s/MT CFR to an end-user, and is for first half July loading.
In the short term, there are expectations that demand will remain muted and prices flat-to-soft as all market participants look to 3Q contracts to provide further guidance.
Crushed lumps of Russian origin are being priced in the low-USD100s/MT CFR this week, but no trades have been confirmed. Molten sulfur prices are still indicated at around USD90/MT CFR, but some consumers are reporting some tightness because of supply-side maintenance and lower production rates from refiners. The China CFR price is assessed at USD90-117/MT on confirmed concluded business and the movement in the bid/offer spread.
Sinopec has lowered prices at Wanzhou by Yn20/MT to Yn970/MT, after prices at the Puguang supplied site were held steady for eight weeks. Dazhou prices were held flat at Yn880/MT. Inventory levels at both Puguang sites are described as average by market participants, and this is suggested as the reason why prices have held relatively stable.
Yangtze River port prices had slipped at the start of the week to Yn950-955/MT, equivalent to mid/high-USD110s/MT CFR, but trade was said to be difficult at these price levels. Prices softened to Yn940-945/MT at mid-week and at press time were trending in the range of Yn935-945/MT, equivalent to low/mid- USD110s/MT CFR.
Port inventories hit 1.89mn MT this week according to official figures, with Zhenjiang port housing 915,000MT. But market participants at press time had placed inventories closer to 1.95mn t. Port inventories have not exceeded 1.8mn MT since early-August 2016. The increase in inventories has been occurring as cargoes purchased earlier this quarter have been arriving steadily following a period of forward selling. Also there are very low levels of liquidity on a Yn/MT sale basis
with inventories in trader hands priced over Yn1,000MT.
India
Sulfur consumer Paradeep Phosphate (PPL) has awarded its tender to buy 40,000MT to trading house Swiss Singapore in the mid/high-USD110s/MT CFR. Details of the company's previous purchase tender here. Buyer SPIC is also heard to have purchased 20,000-25,000MT of Middle East loading sulfur from a trader and a price near USD120/MT CFR is attached.
The India price is held flat at USD115-120/MT CFR on stable pricing for recently concluded business. The MV VSL Pure Vision has been fixed under contract by trading house BGN, to load 50,000MT at Ras Laffan, Qatar to arrive around 10 July at Paradeep port for fertilizer producer IFFCO. A noted trend towards contract deliveries from international and domestic suppliers, away from spot market activity, has been noted in the Indian market. This trend has contributed to the recent period of extended illiquidity, in hand with the consumer maintenance works held earlier this year.
Currently, all eyes are on the start of the monsoon season in India, to provide guidance as to operational rates of sulfur consuming and producing facilities. The next two weeks are of particular importance, if the start of the monsoon season is indeed delayed further.
Middle East
Reports continue of some traders having settled third quarter contracts at USD100/MT fob, a drop of USD4/MT on the second quarter settlement. But, large key trading houses are still in negotiation and are aiming to settle in double digits, citing the continuously poor finished fertilizer market and the increasing freight rates between the Middle East and sulfur importing countries following the Hormuz attack.
It is understood that no Kuwait origin cargoes will be negotiated for shipment to Brazil, with only North African end-users receiving cargoes on a negotiated price. Other Kuwaiti off-takers will lift contract cargoes based on the Kuwait Sulfur Price (KSP). Some sell-side parties have indicated targets of a rollover to very small drop for outstanding end-user negotiations, whilst buyers are understood to want significant decreases on 2Q prices. In the spot market, there is no new spot business heard, keeping prices flat on the week at USD98-101/MT fob.
Kuwait
Planned maintenance at KNPC's Mina Al Ahmadi will only have a small impact on the company's sulfur operations in the third quarter. There will be some delays in Laycans, but enough sulfur will be produced to supply its five 3Q contract cargoes.
Operations at Kuwait's 265,000 b/d Mina Abdullah refinery have been affected by an interruption to seawater supply, which is used to cool production units at the plant. But exports from the refinery have not been impacted, state-owned refiner KNPC said.
Qatar
Qatar's state-owned QP expects the long-delayed USD10.3bn Barzan gas project to start production this year.
Africa
Third quarter negotiations are underway between suppliers and North African end-users. Drops on 2Q pricing are being targeted by buyers because of the persistently weak sentiment in the finished fertilizer market. In the spot market confirmed business is lacking, holding prices steady at USD88-99/MT.
Egypt
An improved level of buying interest is reported from the Egyptian market, but buyers are still bidding near USD90/MT CFR for granular sulfur and in the USD80s/MT CFR for crushed lumps.
Libya
The latest sales tender from sulfur producer NOC was awarded to Greenfield in the low-USD80s/MT fob. The cargo will be shipped to Egypt and freight between Mellitah and Egypt is indicated at USD14-15/MT.
Morocco
Around 296,000MT of bulk sulfur is currently scheduled for discharge at Jorf Lasfar port. The line-up has been thinner at Jorf Lasfar recently, with the lower scheduled discharge volumes largely reflecting a wind-down in second quarter contract arrivals, as well as the persisting loading problems at UAE state-owned supplier Adnoc's Ruwais port.
South Africa
A cargo of Middle East origin has been sold to South Africa by a trader in the low/mid-USD110s/MT CFR Richards Bay for July delivery. Also it is understood that an August delivery has been sold at the same level. There is also demand from a domestic trader for a lateJuly bulk shipment.
Tunisia
Sulfur consumer and fertilizer producer GCT will negotiate 200,000-250,000MT of sulfur under third quarter contract. Nothing has been concluded yet by the company. In the spot market, sulfur consumer and fertilizer producer Tifert closed a tender on 27 June for two 30,000MT cargoes to be delivered in the third quarter. The company was seeking a July delivery early in the second quarter but it is understood that price targets were not met..
Freight Market Overview
The overall market sentiment remains one of stability in the west and bearishness in the east, with European and African prices in the middle also under pressure. The USD73/MT P2O5 retreat in 3Q phosphoric acid prices in India will grab the headlines, but OCP has lowered its pricing sights in Europe and Africa too.
Chinese production costs point to USD310/MT fob for an integrated producer, or USD325-330/MT CFR India. Traders are openly discussing such pricing eventualities. The problem for Chinese producers is that a few headline low-balling offers in India are effectively defining the market east of Suez. Pakistan is providing no support. It imported close to 2mn t DAP in 2018 but half-way through 2019 and the import level has not even reached 300,000MT. NFDC projects zero requirements for imports to end-kharif.
That is unlikely, but it highlights the paucity of demand, not helped by a historically weak Pakistan rupee. Bangladesh has awarded, but producers and local importers are now negotiating over price. The offers published will bear little relation to eventual fob netbacks. The Indian 3Q phosphoric acid contract price at USD655/MT P2O5 CFR, down USD73/MT P2O5 on 2Q, is a double-edged sword for producers.
On the one hand, OCP can continue shipments next quarter, lessening the pressure to granulate, but equally there is less pressure for Indians to import finished DAP as local production ensures a healthy margin at the new figure. West of Suez, Mexico propped up the market with 100,000MT MAP taken from Morocco and Australia. Brazilian MAP prices were steady at USD360/MT CFR but little farmer off-take was noted.
Report By: Parya Ahmad Pour
