China accelerates plans for sulphur futures as Iran war amplifies price swings, sources say

China is planning to launch its first sulphur futures contracts this year, sources said, in a push to help hedge against price swings and increase its pricing power in the global trade for a key material used in mining and agriculture.

The Dalian Commodity Exchange could list the sulphur futures contracts in the fourth quarter of this year, although the timeframe is not finalised and more approvals are needed, two sources familiar with the matter said, asking not to be identified as the plan is not public and they are not authorised to speak to media.

The Dalian exchange and the China Securities Regulatory Commission, which typically grants approval to exchanges for the launch of futures contracts for a new product, did not immediately respond to requests for comment.

The China Securities Regulatory Commission, which typically grants approval to exchanges for the launch of futures contracts for a new product, did not immediately respond to a request for comment.

The exchange has long planned to introduce the contracts, but work has accelerated since the Iran war exacerbated price volatility and underscored the need for a hedging tool, said one of the sources.

China, the world’s largest consumer of sulphur, imports about 50% of its supply each year. Imports in the first five months more than halved versus the year before, customs data showed.

Sulphur is used to make fertilisers and in copper mining and nickel refining, as well as for applications in other industries. Sulphur prices had already been rising for years before the Iran war turbocharged matters because about half the world’s seaborne supply flows through the Strait of Hormuz.

Spot prices of solid sulphur in eastern China hit a record high of 11,850 yuan ($1,743.16) per metric ton earlier this month, although they eased to 9,043.5 yuan per ton on Friday as sulphur is again transiting the Strait, according to data from Shanghai Metals Market.

Prices are still 292% higher than at the same time last year.

The futures contracts could help users hedge against the risk of further price swings, analysts at broker Huatai Futures said in a note on Friday that referenced the plans but did not include a date.

The contracts will also help the industry to build visible commercial inventories at the exchange to reinforce resilience and improve China’s pricing power in the global sulphur trade, they added.

($1 = 6.7980 yuan)

(Reporting by Reuters staff; Editing by Jamie Freed)