• Prices are expected to hold at historically high levels as long as the Strait of Hormuz remains effectively closed. If the situation persists, further price increases are likely, which will only intensify the affordability crisis for global consumers.
Sulphur continued to break historic records in most key international markets at the start of May as the scarcity of spot supply propelled prices higher, which triggered production cuts at some downstream markets, and increased costs in other industrial sectors. The effective blockade of the Strait of Hormuz, which halted the flow of Middle East supply, has forced desperate buyers to compete for the limited available spot cargoes, primarily from North America. Although fresh transactions were limited, export and delivered prices climbed higher, and market sentiment remained jittery. QatarEnergy hiked its sulphur price to $740/t f.o.b., a new record high for this contract since its inception in August 2013.
Nitrogen markets, and urea in particular, have been impacted by a series of geopolitical shocks in recent years which have driven markets over and above normal market factors such as feedstock and shipping costs, crop prices etc.
For many years confined to pilot projects and feasibility studies, biomass based gasification is seeing rapid take up in China for methanol production and may mark a new era in syngas generation.
A market already characterised by tight supply has been thrown into chaos by the Iran war and reduction of phosphate exports from the Gulf at the knock on effect on sulphur prices, a key input into MAP/DAP production.
The start of May saw urea prices start to decline from the yearly highs seen in mid-April, as buyers from India, the US, and Europe stayed away from the markets. India is not expected to return with another tender before late May or early June at the earliest, after booking 2.5 million tonnes for shipment through mid-June, covering immediate requirements, and with domestic production having improved and stocks at a healthy level of over 7 million tonnes. In the US, earlier concerns over May shipments have eased, with net import figures not as low as initially feared, and even some re-export of cargoes to Latin America where higher prices can be earned. With the potential for China to return to export sales towards the end of May and start of June, there was at least a hope that the worst of the current price spike may be over.
• Short-term outlook: Ammonia benchmarks are expected to remain under upward pressure. The PAU turnaround removes a key supply source from an already tight SE Asian market.
Global ammonia benchmarks pushed to fresh highs in April, with a reported trade from Egypt to NW Europe at $905/t c.fr, marking the highest Atlantic level seen since the Middle East conflict began. The move was driven primarily by tightening North African supply, with Algerian offer levels climbing to $840-850/t f.o.b., and Egyptian availability constrained by EBIC being sold out through June, together with limited prompt tonnage from Abu Qir.
The effective closure of the Straits of Hormuz by Iran in the wake of US and Israeli attacks has sent shockwaves through all markets, but sulphur has been particularly badly affected. While the Straits carry 22% of global phosphate exports and 35% of urea, for sulphur around 45% of the 39 million tonnes transported internationally every year must traverse the narrow waterway, with major suppliers like Abu Dhabi and Saudi Arabia relying upon it for their export cargoes.
The US and Israel attacks on Iran and the Iranian response have thrown commodity markets into chaos, with sulphur and sulphuric acid particularly affected.