Section: CRUSU Comment

Th e past few weeks have seen sulphur prices spiking after a steady rise since 3Q 2024. At time of writing, delivered prices to a variety of locations were around $280/t c.fr, their highest level since mid-2022 when the price of commodities of all kinds jumped in the wake of the Russian invasion of Ukraine and subsequent sanctions. Steady buying from Indonesia and China, the two largest importers of sulphur, appears to have supported the market, in China’s case mainly for phosphate production as well as a variety of industrial processes, and in Indonesia’s case to feed the high pressure acid leach (HPAL) plants that are producing nickel for the battery and stainless steel industries. Although Chinese buying has dropped off slightly since Lunar New Year, and demand has also slackened in India, Indonesia’s appetite continues unabated, having tripled its nickel production since the start of the decade to become the world’s largest producer, representing 60% of global supply in 2024.

The start of a new year is a traditional time to take stock of the previous 12 months and look ahead to the next. In this regard, CRU’s most recent annual client survey, conducted at the end of December last year, makes interesting reading as to your own concerns for 2025 and beyond. There were numerous responses across commodity and financial sectors, and broadly based worldwide, if slightly skewed towards Europe and North America, but across all of these the key worry for the coming year clearly emerged as trade tariffs and protectionism. This is perhaps unsurprising, given incoming US president Donald Trump’s avowed intent to impose blanket 20% tariffs on all goods entering the US, and up to 60% on China. While most clients did not think tariffs would rise as much as some of Trump’s rhetoric might suggest, most expect rises of 5-10% across the board, and Asian businesses are most concerned. CRU’s most recent position paper on US tariffs highlights some of the internal political and legal challenges in implementing these, but does acknowledge that some rises will be inevitable, and may well produce the kind of reciprocal measures last seen in the previous Trump administration’s trade war with China and the EU in 2018.

OCP’s recent award of a contract to Worley Chemetics for three new greenfield sulphuric acid plants has confirmed the phosphate giant’s plans for its new Mzinda Phosphate Hub in Morocco, one of the largest investments in new phosphate capacity anywhere in the world over the next few years. It is part of a number of new investments under way in Morocco as OCP continues to expand its already considerable phosphate facilities. Three new fertilizer lines came onstream at Jorf Lasfar in 2023 and 2024, each with a capacity of 1 million t/a of diammonium phosphate (DAP). The Mzinda mega-project will add another 4 million t/a of triple superphosphate (TSP) capacity by around 2028-29, and will relieve some of the issues that OCP has in importing ammonia for DAP production, as TSP only requires phosphate rock and phosphoric acid. There is also an additional 1 million t/a of TSP capacity under construction at Jorf Lasfar, which is expected to be completed next year, and OCP also announced last year that it would build an integrated purified phosphoric acid (PPA) plant at Jorf Lasfar. The first phase of the project consists of 200,000 t/a of P2 O5 pretreated phosphoric acid capacity, 100,000 t/a (P2 O5 ) of PPA capacity, and 100,000 t/a of technical MAP (tMAP) capacity. The site will also be home to downstream production of phosphate salts and lithium iron phosphate (LFP) capacities. The initial plants will be delivered starting in mid-2026, carrying through into 2029, constructed in conjunction with JESA, a joint venture between OCP and Worley.

One of the biggest areas for new sulphuric acid demand in the past few years has been in nickel processing plants, particularly in Indonesia. A decade ago, incoming president Joko Widodo took a strategic decision that the country needed to try and capture more of the value chain from its mining and mineral industry, which was focused at the time on exports of aluminium, copper and nickel ores and concentrates, mainly to China. Over the past 10 years, the export of raw ores has been progressively restricted and companies instead compelled to build downstream processing plants for the metals. With China the main recipient of Indonesian ores, much of the investment in metals processing in Indonesia has been via Chinese companies.

While the events of the past few years have been difficult for Europe on many fronts, including a wholesale realignment of its energy sources with the restriction of access to Russian oil and gas, the effect on Europe’s sulphur production seems likely to be just as profound.

At the end of April, Australian mining giant BHP made waves in the business world by offering US$39 billion to take over its London-based rival Anglo-American, creating the world’s largest diversified mining company. For its part, Anglo’s board announced that it was rejecting the offer, saying that it was “opportunistic” and that it “significantly undervalued” their company. A revised bid was said to be in preparation at time of writing.

The phosphate industry, the dominant consumer of sulphuric acid worldwide, has grown to its present size on the back of fertilizer consumption. And while this has seen considerable growth over the past decades, especially in countries like China, India and Brazil, it has generally been fairly steady and – subject to the annual vagaries of weather and the commodity cycle – relatively predictable. However, the world economy is now in the throes of a major transformation towards less carbon intensive generation and use of energy, and that is disrupting many markets, including that for phosphates.

“ The need for technical knowledge and insights has never been more important.”

One of the things that produced a lot of worried news headlines over the past couple of years is whether the energy transition is likely to lead to a shortage of sulphur as we switch away from fossil fuels on a large scale. As we’ve discussed in this magazine, those fears are overblown, certainly in the medium term future. Peter Harrison of CRU tackled the issue in his sulphur markets presentation at the recent Sulphur and Sulphuric Acid conference in New Orleans, and while he did admit to some reduction in sulphur supply from oil in the 2030s and increasing into the 2040s, increased sulphur recovered from sour gas is likely to more than make up for that at least until the 2040s. But one of the things that did strike me about his presentation is the extent to which the energy transition is indeed already changing the way that the sulphur market works, and will increasingly do so over the next few years.

All is not well with the Chinese economy. Growth has slowed to a fraction of what it was, only 0.8% in 2Q 2023, and has not bounced back as expected as covid lockdowns were eased. Exports and imports are both falling, debt has reached 300% of GDP, youth unemployment is running at 20%, and the property market is collapsing, with huge property developers like Evergrande and Country Garden only avoiding bankruptcy via government arranged loan restructurings. Consumer prices have fallen year on year, raising the spectre of deflation, and productivity growth has fallen from 4.5% year on year in 2006-7 to around 0.8% today. The yuan is trading at a 16-year low against the dollar.