Middle East conflict effects on Southern Africa

You’ve read plenty about how the Middle East conflict could force phosphate fertilizer producers to curtail operations due to affordability issues, but truth be told, we have not reached that crisis point yet.

Instead, the real panic is unfolding in Southern Africa right now.

Key phosphate producing countries outside the Middle East have just enough stocks to last quite some weeks. Many also have well-established logistics to move sulphur to their consuming sites, so the challenge is relatively straightforward for them – find the damn tonnes.

It is far more complex for DRC consumers, who are 2,300km away from Dar es Salaam, the busiest import point in Southern Africa.

The fear among sulphur buyers in the DRC is legitimate.

At current consumption levels, which remain healthy and supported by copper economics, a sulphur shortage is approaching fast. 

Acuity Commodities know the monthly consumption of the DRC. I plotted that against imports into the region over the first three months of the year, as well as port stocks that I review every month. The picture suggests sulphur stocks will last less than two months.

It becomes problematic when around 90% of the region’s sulphur supply is sourced from the Middle East.

Our last spot sulphur assessment of $1,120-1,150/t DAP Kolwezi on March 10 showed a 21% week-on-week increase. That is a direct reflection of panic buying.

If you were a trader holding much-needed stock right now, you would also be asking for a higher price, no?

More ships need to arrive to keep the sulphur supply chain moving in Southern Africa. I fully expect sulphur from non-traditional sources to enter the market. Routes may be untested, product quality may differ from what buyers typically accept, and freight costs could be high – but the risk profile for traders may now look more acceptable than before.

If a truck is loaded today from Dar es Salaam to Kolwezi, transit alone takes around three weeks. Once sulphur stocks at a DRC buyer level fall, if they are not replenished quickly, it will take weeks before inventories can be rebuilt.

Oh, and add rising fuel prices to the equation...

I will leave you to digest that.