Insight on the impact of the Middle East tension on the sulphur market

Let's go straight into it. My view on how the US-Israel attacks on Iran are impacting the global sulphur market for now.

𝗧𝗵𝗲 𝗯𝗶𝗴𝗴𝗲𝘀𝘁 𝗶𝗺𝗽𝗮𝗰𝘁 𝗼𝗳 𝘁𝗵𝗲 𝗰𝗼𝗻𝗳𝗹𝗶𝗰𝘁 𝗶𝘀 𝗼𝗻 𝘀𝘂𝗹𝗽𝗵𝘂𝗿 𝗹𝗼𝗴𝗶𝘀𝘁𝗶𝗰𝘀, due to severe disruption to traffic through the Strait of Hormuz. Sulphur exports from Bahrain, Iran, Kuwait, Qatar, Saudi Arabia and the UAE are effectively on hold. The impact on sulphur trading depends on how long the conflict lasts and how long the Strait of Hormuz remains out of action.

Using the sulphur trade data that Acuity Commodities publish every quarter, 𝗪𝗲𝘀𝘁 𝗔𝘀𝗶𝗮 𝗲𝘅𝗽𝗼𝗿𝘁𝗲𝗱 𝗻𝗲𝗮𝗿𝗹𝘆 𝟭𝟲𝗺 𝘁 𝗶𝗻 𝟮𝟬𝟮𝟰, 𝗲𝗾𝘂𝗶𝘃𝗮𝗹𝗲𝗻𝘁 𝘁𝗼 𝗼𝘃𝗲𝗿 𝟱𝟬% 𝗼𝗳 𝗴𝗹𝗼𝗯𝗮𝗹 𝘀𝗲𝗮𝗯𝗼𝗿𝗻𝗲 𝘁𝗿𝗮𝗱𝗲. West Asia here includes Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

With no Middle East export cargoes able to transit the Hormuz, though the Suez could be explored as an alternative, traders and buyers are being forced to look elsewhere for supplies. 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗵𝗮𝘀 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝗱 𝗶𝗻 𝗞𝗮𝘇𝗮𝗸𝗵, 𝗖𝗮𝗻𝗮𝗱𝗶𝗮𝗻, 𝗨𝗦𝗚𝗖 𝗮𝗻𝗱 𝗜𝗻𝗱𝗶𝗮𝗻 𝘀𝘂𝗹𝗽𝗵𝘂𝗿 𝗲𝘅𝗽𝗼𝗿𝘁𝘀. 𝗛𝗼𝘄𝗲𝘃𝗲𝗿, 𝗺𝗮𝗻𝘆 𝗽𝗿𝗼𝗱𝘂𝗰𝗲𝗿𝘀 𝗮𝗿𝗲 𝗮𝗹𝗿𝗲𝗮𝗱𝘆 𝗰𝗼𝗺𝗺𝗶𝘁𝘁𝗲𝗱 𝗳𝗼𝗿 𝗠𝗮𝗿𝗰𝗵 𝗹𝗼𝗮𝗱𝗶𝗻𝗴, 𝗹𝗶𝗺𝗶𝘁𝗶𝗻𝗴 𝗻𝗲𝗮𝗿-𝘁𝗲𝗿𝗺 𝗿𝗲𝗹𝗶𝗲𝗳. 𝗜𝗻 𝗞𝗮𝘇𝗮𝗸𝗵𝘀𝘁𝗮𝗻, 𝘃𝗲𝘀𝘀𝗲𝗹 𝗺𝗼𝘃𝗲𝗺𝗲𝗻𝘁𝘀 𝗮𝗿𝗲 𝗮𝗹𝘀𝗼 𝗯𝗲𝗶𝗻𝗴 𝗱𝗲𝗹𝗮𝘆𝗲𝗱 𝗯𝘆 𝗶𝗰𝗲 𝗰𝗼𝗻𝗱𝗶𝘁𝗶𝗼𝗻𝘀.

There are opportunistic offers, including Middle East cargoes that managed to leave the Hormuz ahead of the conflict, or part-cargo tonnes that are unsold. 𝗣𝗿𝗶𝗰𝗲 𝗼𝗳𝗳𝗲𝗿 𝗹𝗲𝘃𝗲𝗹𝘀 𝗼𝗳 𝘁𝗵𝗲𝘀𝗲 𝘀𝗽𝗼𝘁 𝘁𝗼𝗻𝗻𝗲𝘀? 𝗪𝗮𝘆 𝗮𝗯𝗼𝘃𝗲 𝘁𝗵𝗲 𝗹𝗮𝘀𝘁 𝗽𝗲𝗮𝗸 𝗶𝗻 𝗹𝗮𝘁𝗲 𝗝𝗮𝗻𝘂𝗮𝗿𝘆. Also, China and Southern Africa are two markets holding significant sulphur inventories at ports and are therefore still seeing active domestic discussions.

𝗧𝗵𝗲 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝘀𝗶𝘁𝘂𝗮𝘁𝗶𝗼𝗻 𝗶𝘀 𝘁𝗲𝘀𝘁𝗶𝗻𝗴 𝗮𝗳𝗳𝗼𝗿𝗱𝗮𝗯𝗶𝗹𝗶𝘁𝘆. When Russia attacked Ukraine in February 2022, sulphur was priced at around $200/t CFR China. Before the current Middle East conflict, sulphur was trading at $515-520/t CFR. Any further increases will be difficult for buyers to absorb given existing credit limits.

𝗜𝗳 𝘁𝗵𝗲 𝗳𝗹𝗼𝘄𝘀 𝘁𝗵𝗿𝗼𝘂𝗴𝗵 𝘁𝗵𝗲 𝗛𝗼𝗿𝗺𝘂𝘇 𝗯𝗲𝗴𝗶𝗻 𝘁𝗼 𝗿𝗲𝗰𝗼𝘃𝗲𝗿 𝘄𝗶𝘁𝗵𝗶𝗻 𝗮 𝘄𝗲𝗲𝗸 𝗼𝗿 𝘁𝘄𝗼, 𝗮𝗻𝘆 𝗴𝗮𝗶𝗻𝘀 𝗶𝗻 𝘃𝗮𝗹𝘂𝗲 𝗳𝗿𝗼𝗺 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘀𝘁𝗶𝗰 𝘀𝗮𝗹𝗲𝘀 𝗰𝗼𝘂𝗹𝗱 𝗾𝘂𝗶𝗰𝗸𝗹𝘆 𝗲𝘃𝗮𝗽𝗼𝗿𝗮𝘁𝗲. If the conflict lasts up to a month, tighter supply will put further upward pressure on prices, with the market relying heavily on inventories for consumers and storage space for producers to cushion price shocks. Anything beyond two months would squeeze global sulphur supply, potentially forcing sulphur consumers to curtail production.