Market Developments
The Chinese sulfur market stirred interest and confusion this week with some price volatility resurging after a consistent downturn since late 3Q/early 4Q in 2018. The rise in domestic values - which started with the speculative Huaxicun market - began early last week and lost steam by the end of last week, before picking up momentum early this week again and then slowed down at the time of writing. The mini yo-yo price trend appears not to be supported by fundamentals but by river traders and producers replenishing as prices move up, and traders covering short position.
It has been expected to observe some speculative action in the Chinese market since prices fell from the USD190s/MT CFR in late 3Q/early 4Q. However, the weaker than expected macro situation and a relatively weak phosphates market have kept market players rather bearish. As we enter the second week of April, some 2Q contract negotiations are still ongoing with some settlements yet to obtain full confirmation from the buy and sell sides. This perhaps is also a result of the confusing global picture at the moment for both formed and molten sulfur.
Market Drivers and Restraints
Weekly:
2nd Quarter of 2019:
3rd Quarter of 2019:
Regional Market Perspective:
The Chinese domestic sulfur market experienced a mini roller coaster ride since last week. The volatility began with the speculative Huaxicun platform, and one of the possible reasons was trader covering short by buying up domestic product, which pushed the Huaxicun sulfur index from CNY980/t last Wednesday to CNY1,050/MT early this week.
Additionally, Formosa in Taiwan closed a tender on Monday for 15,000MT to load at Mailiao in early May. The sale was confirmed in the mid USD110s/MT FOB, therefore if going to China it reflects the mid USD120s/MT CFR.
There has been a lack of liquidity for crushed lump sulfur. Iran used to be a key exporter of crushed lump to China but less is moving this way now as China continues to tighten up its environmental protection policy.
As for fertilizer producers, particularly for those in the south, reaction towards the recent spike in Huaxicun or domestic values has been minimal. The reason is the same one that has been valid the past few months - their inventory levels are high, at least much higher than those at river ports. At the time of writing we understand there will be production cuts from phosphate producers in 2Q which may affect their sulphur consumption, too.
Offers of Kavkaz tons of 50,000 MT and above have been heard this week. We expect an official award from Gazprom Export by next week.
A few weeks after an explosion at a chemical plant Tianjiayi Chemical in Jiangsu, the impact on the sulfur market has finally emerged. This has so far affected two to three chemical plants in Jiangsu, which are forced to shut temporarily, resulting in a loss of 200,000-300,000 MT/year molten sulfur while the plants are closed.
Reliance in India has already concluded long-term contracts for 18 months with a few market players. The quantities being offered are thought to exclude any potential new production from its gasification project. Wilson received a sulfur cargo earlier this month at Tuticorin and is next expected to return to the market for a June cargo.
There are strong indications Middle East contracts are now concluded on both FOB and CFR basis. While full confirmation from the buy and sell sides is still pending, CFR levels have been reported between the high USD 90s/MT and the low USD100s/MT CFR, while FOB contracts were already finalized in the low/mid USD100s/MT FOB with traders, while some FOB contracts with end-users were heard in the low/mid USD 80s/MT FOB.
As discussed in the South East Asia section, last week there were reports of at least one April loading spot cargo being sold in the mid/high USD100t/s FOB. This has been linked to a trader covering a short position.
Middle East producers do not usually offer spot granular sulfur to the market with the exception of Muntajat in Qatar, who holds a monthly sales tender, and Red Sea tons.
Therefore it has been interesting to note, as we have been discussing, Muntajat selling more than one cargo since the start of the year at the closure of its monthly tenders. We interpret this as tons had been freed up following the confirmation of some parties who discontinued their contracts with Middle East sulfur producers for this year.
Turkey's Toros bought 15,000 MT after closing its purchase tender. The price was said to be in the mid/high USD100s/MT CFR.
Iranian granular sulfur price has been indicated at USD 90-95/MT FOB still by players active in the market. Iran exported 77,000t to China in February, following January volume of 62,000t. In 2018, it exported 860,000t of which China received 86%. Export activity slowed recently due to lower pricing which makes exports, including that of Turkmenistan via Bandar Abbas, less workable.
In January, Kazakhstan exported 275,000t with the top three countries served as Morocco, the US and Tunisia. Volumes were also seen to Brazil, Israel, Senegal, China, and Lithuania. This follows 2018 exports of 3.1m t, up from 2.1m t in 2017 on increased domestic production.
Full confirmation for 2Q contracts to North Africa is still outstanding. Middle East tons have been reportedly concluded between the high USD 90s/MT and the low USD100s/MT CFR. We expect a clearer indication regarding the price level ex-FSU next week, while some contracts of Mediterranean origin were reported by the sell side to be ongoing as well.
South Africa is widely described as comfortably covered. Foskor is understood to be under a planned turnaround since March still. The only deal we heard in the past week was a 10,000MT lot bought by local consumer, heard at around USD120/MT CFR. South Africa received a 45,000 MT cargo from Saudi Arabia in February, following receipt of a January cargo of 58,000 MT from Kazakhstan. This brings it total for the first two months of the year to 103,000t. 2018 imports were around 929,000t, up a notable 74% from the 534,000 MT imported in 2017.
Libya's NOC is understood to have sold an April cargo in the mid USD 80s/MT FOB. In related news, we are watching closely the developments in Libya as it has potential to become a civil war. On Monday, Tripoli's airport was targeted in an air strike, reportedly ordered by Libyan general Khalifa Haftar's so-called Libyan National Army.
Sulfuric Acid
This week, many sulfuric acid players are gathered in Chile for CESCO week amid a slow spot market. We expect conversations to center on outstanding requirements for 2019 with recent limited interested in prompt tonnage. The driving factor remains the return of some Codelco supply to the market. Slow global spot demand has softened prices recently, but supply disruptions have stopped prices from falling further for now. Europe remains the tightest export region while greater than expected availability out of Asia is primarily being driven by increased volume out of China. The weakness in the related sulfur and phosphate markets is impacting sentiment slightly as well with incremental purchases to support fertilizer production limited as well as sulfur-burning being optimized on better economics.
Report By: Encieh Arbabi
