SunSirs: Sharp Rise in Sulfur and Ammonium Phosphate Prices

The international sulfur market is experiencing a strong upward trend. Qatar Energy's latest announced December sulfur contract price has been significantly increased by 95 USD/ton, reaching 495 USD/ton (FOB), which has surpassed the historical high of 2022. Compared with the beginning of the year, it has increased by as much as 198%, and about 204% year-on-year, with a remarkable upward trend.

Volatile movements in the international market were quickly transmitted to China. According to assessments, the cost of sulfur corresponding to the Yangtze River and northern ports in China has risen to about $520-521 per ton, which, when converted into RMB, is about RMB 4258-4266 per ton. This is 223-231 RMB per ton higher than the current port spot price of 4035 RMB per ton, with the RMB quotation increasing by as much as about 22% compared to the previous month, and the cost pressure has become increasingly prominent.

High cost pressure exacerbates losses in the ammonium phosphate industry

Sulfur, a key raw material for the production of monoammonium phosphate, has seen a sharp price increase, directly driving up production costs. Calculated based on the current spot price of sulfur at the Yangtze River Port of 4,035 yuan per ton, the theoretical production cost of monoammonium phosphate has exceeded 4,200 yuan per ton. However, the current ex-factory price of 55% powdered monoammonium phosphate in Hubei region is only about 3,650 yuan per ton, which means that the loss per ton of product is approaching 600 yuan, and production enterprises are under huge pressure from cost inversion.

The support for costs continues to strengthen. The China port spot market for sulfur is heavily bearish, and prices are steadily rising, supported by Qatar's high-priced contracts. The strength of sulfur will inevitably lead to an increase in the price of sulfuric acid, which will provide a more solid support for the cost of monoammonium phosphate.

Multiple factors are in play, and the market is deadlocked

Although the cost pressure is huge, the monoammonium phosphate market is not without support. On the one hand, the backlog of orders of major producers is relatively sufficient. Data shows that as of the end of November, the backlog of orders of sample enterprises was approximately 435,000 tons. Most enterprises can meet the shipping demand for about one month, and the short-term sales pressure is limited. This gives enterprises the confidence to maintain prices.

On the other hand, downstream demand has shown divergence. Compound fertilizer enterprises mainly purchase raw materials on an as-needed basis. Facing the continuously rising high prices, their willingness to chase the rising prices and stock up is obviously insufficient. In addition, as it is in the winter storage period, under the combined influence of high raw material prices and policy-guided prices, downstream enterprises generally slow down their procurement rhythm cautiously.

Outlook: The game continues, focus on supply adjustments

Overall, the current monoammonium phosphate market is in a fierce game of "cost pressure" and "order support". It is expected that in December, companies' new price setting or order-taking strategy will face difficult adjustments. If the cost pressure continues to fail to be smoothly passed on to the downstream, some companies with extremely compressed profit margins may respond by reducing the production rate of the equipment. The changes in the market supply pattern and the trend of policy guidance price are worth close attention.

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