Increasing supplies and weaker demand from the phosphate fertilizer industry are likely to pressure Chinese sulphur prices to fall during the first quarter of 2023. China's domestic sulphur production capacity is rising, also prompting the country to cut back on imports.
Private-sector refiner Shenghong started trial production in the third quarter of 2022 at its Lianyungang refinery in east China's Jiangsu province. Its sulphur capacity of 600,000 t/yr is still at a low utilisation and mainly caters to its own chemical products. It is expected to start regular production in February 2023 when Shenghong will have extra sulphur supplies to feed the domestic market. The impact from Lianyungang' start-up on the current sulphur market was limited at the end of 2022.
PetroChina's Jieyang refinery in south China's Guangdong province is expected to start up in February 2023, which is also unlikely to bring about large-scale changes to China's current sulphur market.
But the extra export quota allocated to Chinese phosphate fertilizer producers in November might have pushed them to buy more sulphur during November-December. Any increased purchases might have been moderated by rising global sulphur prices.
Russian sulphur exports to China were disrupted prior to December 2022 because of export licensing issues. Higher crude prices and logistics issues added to the cost to import cargoes from Turkmenistan and Uzbekistan. Firm demand from smelters in Indonesia and Senegal likely pushed up sulphur prices in December. Russian sulphur is expected to receive its export licence by the end of 2022, lifting availability from Russia by January and weighing on global sulphur prices.
Chinese authorities are likely to resume their previous customs inspections for phosphates fertilizer exports from January 2023, restricting demand for sulphur.
Kuwait 600,000 t/yr expansion at the al-Zour refinery started up in November and is to reach full operations from February 2023. This will add to availability in the first quarter of 2023 to add to the pressure on global sulphur prices.
The third quarter of 2022 saw a dip in sulphur prices, with this trend starting in June when the Huaxicun Commodity Contracts Exchange stopped trading from 16 June, as Chinese authorities deemed the exchange as non-standard. Chinese DAP producers cut their operating rates with an unclear export policy for the second half of this year. Operating rates remained at 55-65pc at river ports but fell to 50-55pc in Yunnan and Guizhou provinces at the end of June compared with 50-60pc in early June.
Price pressure
Chinese authorities implemented a de-facto export quota regime in July for phosphate fertilizers for the second half of 2022. Chinese DAP producers cut their operating rates to 40-50pc at river ports and to 50pc in Yunnan and Guizhou at the end of July, which resulted in a slump in global sulphur prices.
Qatar's state-controlled Muntajat set the Qatar Sulphur Price (QSP) for August at $77/t fob Ras Laffan/Mesaieed at the end of July, down by $351/t from the QSP of $428/t fob in July. Argus granular cfr China assessments slumped to $95/t on 4 August. The sudden dip curbed Chinese buyers from purchasing from the international market and prompted them to turn to the domestic market. This weaker import demand supported sulphur prices to continuously rise since August 2022. Granular cfr China assessments rebounded to $197.50/t on 12 December.
China imported 2.4mn t of sulphur during April-June 2022, up by 50pc from a year earlier, driven by phosphate fertilizer exports. These imports slowed after the de-facto export quota regime was implemented for phosphate fertilizers. Sulphur imports were 2.5mn t for July-October, down by 5.9pc from a year earlier, taking January-October imports to 6.65mn t and down by 22pc from a year earlier.
