It was supposedly Lenin who said that there were “weeks when decades happen”, and the past few weeks have felt very much like that. The outbreak of conflict in Ukraine has sent shockwaves across the world and may have changed it permanently.
It’s a slightly dispiriting fact about the sulphur industry that most of its producers don’t really want it. If you’re a refiner or a sour gas producer, you mainly care about the diesel and gasoline or natural gas that you can process and sell, and the sulphur is just the inconvenient component that the law and your customers force you to remove. But at times when sulphur prices, as they have at the start of this January, reach levels as high as $300/t, then the industry standing joke is that sulphur suddenly stops being a by-product or waste product, and starts to become a ‘co-product’ instead.
Th e past year has seen an extraordinary run-up in sulphur and sulphuric acid prices, the former from a low of around $50-70/t f.o.b. in mid-2020 to more than $100/t higher than that at the end of Q1 2021. Prices then plateaued for much of this year, but they have begun moving inexorably upwards again in the past couple of months, drawn by rapidly rising phosphate prices, and Middle East sulphur rates recently breached price levels not seen since 2012.
Mining giant BHP’s decision this August to dispose of its oil and gas assets to Woodside Petroleum (see Industry News, page 11) in a deal estimated at $29 billion is certainly eye-catching. But it is also part of a larger pattern of divestment of fossil fuel assets by oil and gas companies who have dominated the industry for decades. It follows divestment by investors, institutional and otherwise, as efforts to tackle climate change consistently point towards a future where we will be using gas, and especially oil, far less – indeed, where many are talking about achieving ‘net zero’ carbon emissions by the middle of the century or shortly thereafter.
Commodity markets are often volatile, and sulphur and sulphuric acid can be more so than most, with much of their supply coming from involuntary production, and sulphur supply in particular often dependent on the timing of large scale oil and gas projects. Even so, this year’s price rises, in some cases tripling in just over a year, have been especially eye-catching.
There is an old adage that if you put two economists in a room, you will get three different opinions. As the world enters its second year of dealing with the coronavirus pandemic, that certainly still seems to be the case among those grappling with predicting an increasingly uncertain world.
Suddenly it’s a good time to be a sulphur producer again. Sulphur prices started 2020 at a low point of $40/t, a level not seen for a decade or more. However, after a slight recovery when the pandemic hit and refineries began reducing production, since August the market trend has been rapidly upwards, now approaching levels of $200/t that have not been seen for a couple of years.
The turning of a new calendar year is a predictable waypoint in our lives. That is why it has always traditionally been a time for reflection on the past and looking to the future. Therefore, given how 2020 had turned out, perhaps there was an inevitable hope that the turning of the New Year and the start of 2021 might see an improvement in things in general, and of course the trajectory of the pandemic in particular, especially now that several vaccines have been approved for use in record time, and a massive programme of vaccination has begun across the world.
Metal markets are used to ups and downs, and, as we discuss elsewhere in this issue, this year has seen more than most, mainly thanks to the virus that is still keeping us indoors – as I write this, the UK has just moved back into a second national ‘lockdown’. However, this year has seen the fortunes of one metal in particular simply rise and rise – nickel.
Do you remember Peak Oil? This was the theory, driven by research originally conducted by petroleum geologist M.K. Hubbert in the 1950s, that oil production inevitably followed a bell curve, with supply eventually peaking as easier reserves were exhausted, leading to an inflexion point in production and a long tailing off. Originally Hubbert was talking solely about US oil production, and he seemed to have been borne out by the evidence. But a lack of discoveries of new large fields in the 1990s led to a revision of the theory that predicted a global production peak in 2005-6, potentially leading to rapidly rising oil prices until demand destruction occurred.