Entering September, after a wave of restocking by some players holding long-term contracts, China’s domestic sulfur spot market price rebounded to around RMB 7,800/mt. However, as purchasing to cover this month’s contracted delivery volumes was completed, market inquiries have returned to a lackluster state, and sellers’ wait-and-see stance is once again being tested. Absent any unexpected factors, the market lacks momentum for further gains, and the outlook for China’s sulfur port spot market over the coming period is not optimistic.
On closer inspection, the recent price rebound was not driven by any substantive recovery in demand but was mainly a correction of the price structure. Earlier, port spot prices continued to fall, creating a clear inversion between domestic spot and USD-denominated resource prices. Long-term contract suppliers then stepped in to restock, driving a temporary rise in the market. Historical data show that when the domestic-international price spread is too wide, either international prices are dragged down or domestic prices rebound. Not all such rebounds are tied to stronger demand. Therefore, the sustainability of restocking-driven gains is limited, and any pullback after the rebound should be viewed as a return to fundamentals.
On the domestic supply side, as some maintenance plants have resumed operations, monthly domestic output is expected to rise month on month. On imports, given previously high USD-denominated resource prices and shipping disruptions in the Strait of Hormuz, the September import schedule known to Chempricehub is very limited. As a result, domestic supply in September has not placed much bearish pressure on the market, shifting market focus back to demand. Chempricehub data show that as of September 3, the weekly capacity utilization rate of the monoammonium phosphate (MAP) industry was 51.26%, down 0.66 percentage points week on week and 14.15 percentage points year on year. The caprolactam industry’s weekly capacity utilization rate was 66.94%, down 0.92 percentage points week on week and 23.47 percentage points year on year. The titanium dioxide industry’s weekly capacity utilization rate was 71.77%, up 0.22 percentage points week on week but down 5.57 percentage points year on year.
The above data show that phosphate fertilizer plant operating rates are all significantly below year-ago levels. Moreover, given the policy context of targeted supply guarantees by the three major oil companies and export restrictions on phosphate fertilizer and sulfuric acid, their rigid demand for merchant sulfur in the spot market is very limited. Although the autumn fertilizer market has begun, it has not provided an immediate boost to the phosphate fertilizer market, and its follow-up impact remains to be seen. As for caprolactam, producers have been reducing operating rates for some time to stimulate a market upturn, so the sector’s plant load is declining both week on week and year on year. Although the titanium dioxide industry’s capacity utilization edged up week on week, its marked year-on-year decline also signals that the sector’s support for the sulfur market is limited.
Taking the above market performance and the supply-demand picture together, the author believes that market concerns will remain focused on demand, and this factor will be difficult to change in the short term.
First, with regard to downstream operations, phosphate fertilizer, caprolactam, and titanium dioxide are all unlikely to engage in explosive restocking. In particular, phosphate fertilizer producers, constrained by export restrictions and supported by supply-guarantee resources, have limited willingness to make market-based purchases. In addition, restricted sulfuric acid exports have caused smelter acid prices to keep falling, continuously pressuring related downstream enterprises’ ability to absorb sulfur procurement costs. Second, the supply side is unlikely to create a bullish reversal. Based on currently known industry expectations, although domestic output will increase slowly, imported resources arriving in September are limited; the overall supply increase is manageable and insufficient to reverse the price trend. Third, the logic for a market price rebound is weakening. The long-term contract restocking triggered by the price inversion has largely been completed in September. The next rebound still requires the inversion to deepen again, and the probability of a short-term trigger is low. Currently, rumors in the USD-denominated market suggest buying activity by Indonesia around CFR $950/mt. If this deal is confirmed, it will inevitably intensify domestic players’ wait-and-see sentiment. Coupled with autumn fertilizer demand failing to exceed expectations, spot sentiment faces pressure, and the market outlook is unlikely to be optimistic.
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