Don’t hold your breath
China is the world’s primary elemental sulphur importer by a significant margin. In 2016, the country took 11.96Mt of elemental sulphur – significantly more than the 6.09Mt taken by the US or the 5.04Mt taken by Morocco, the next two most significant importers. China accounts for about 35% of global sulphur trade.
In 2017, Chinese elemental sulphur imports are expected to disappoint on volumes and prices.
Elemental sulphur import volumes are expected to come down from 11.96Mt in 2016 to 9.44Mt in 2017 representing a reduction of 25% year-on-year. This decline will be driven by the following factors:
Overall, we expect total sulphur demand in China to fall by 1.08Mt y/y in 2017 and total elemental sulphur production to rise by 1.17Mt/y in 2017 – these will be the two main drivers of the falling import requirement. (That said, a general trend of decreasing pyrites burning in China will offer some limited support to 2017 elemental sulphur imports. Also, note that our estimate for 2017 import demand assumes no change in sulphur stocks.)
At the same time, the Chinese solid import benchmark price is expected to remain weak. The cfr China (solid, spot) price averaged $169/t in Q1 2015. Prices came down as global sulphur markets moved into a state of oversupply in mid-2015: the benchmark stood at $124/t in Q4 2015 and had fallen to $82/t in 2016 (annual average). The benchmark is expected to remain weak over 2017, rising to $85/t as a result of sulphur supply challenges early in the year (the delayed commissioning of Barzan in the Middle East; Russian export curtailments due to technical problems at Astrakhan; and stockpiling in Central Asia) and the sentiment effects of the December 2016 OPEC deal. However, three factors will work to arrest meaningful price rises in 2017: weak Chinese import demand; the establishment of the YUC-Kailin-Wengfu sulphur-buying consortium; and significant oversupply in global elemental sulphur markets.
While the headline Chinese benchmark has come down, along with port-specific benchmarks on the east coast, not all Chinese import price benchmarks have fallen since 2015. In particular, the delivered northwest China benchmark remains stable at 2015 levels – even in early 2017.
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