Section: CRUSU Comment

T he end of August saw a paper published in the Journal of the Royal Geographical Society by Dr Mark Maslin of University College London. Widely reported, it looked at the prospects for sulphur production in an era of declining fossil fuel use, concluding that there could be “a shortfall in the annual supply of sulphuric acid of between 100 and 320 million tonnes by 2040, depending on how quickly decarbonisation occurs”. It added that “unless action is taken to reduce the need for sulphuric acid, a massive increase in environmentally damaging mining will be required to fulfil this resource demand.”

The past couple of years have been quite the wild ride, with major global events dominating markets outside of the usual concerns of broad market supply and demand. It seems like a long time ago now, but this time last year, the price of a barrel of Brent crude was about $75. Go back two years, in the wake of the onset of covid restrictions, and that barrel would have cost you $40 (and just $25 a couple of months before that). In the wake of Russia’s attack on Ukraine, you could easily have paid $130, and it has been hovering around $110/bbl for the past few months. The last time oil spent any time at that level was in 2014, just before the Chinese economy ran out of steam and prices slumped by 70%.

Sulphur prices keep on climbing. A quick check as I was writing this showed some indicators above $600/t, around four times what they were last year. As the title of this editorial suggests, what goes up must of course eventually come back down, but of course as always the question is: when?

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.