Section: CRUSU Comment

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.

“T here are,” Mark Twain once remarked, “three kinds of lies: lies, damned lies, and statistics.” It’s certainly difficult to know what to make of economic statistics and indicators at the moment, in the world turned upside down that the Covid-19 pandemic has delivered. Here in the UK, we are told that April and May saw the national economy contract by 25%, the largest fall in 300 years of the Bank of England’s economic record keeping, and the situation is very similar across much of the developed world. But how real is that figure? After all, we were all sent home in March, to ‘lock down’ and prevent the spread of the virus, and we are only now starting to move back towards some semblance of normality. Some of us, fortunately or not, have still been able to work from home, but for much of the economy, especially for much of the service sector; tourism, travel, restaurants and hotels, theatres and cinemas – there has been zero activity. Remove half of the largest sector of the economy for three months and surely a 25% fall in output is exactly what you’d expect? But is that real, or just a number? Has that activity gone for good, or, now that we are emerging, blinking into the sunlight again, can we switch the economy back on again as easily as we switched it off?

Ordinarily I try to choose a different subject each issue for an editorial, but as April lengthens towards May, and here in the northern hemisphere we start to see the first signs of summer, there unfortunately remains only one subject that is obsessing every industry, and that is the Covid-19 pandemic and its impact upon every aspect of our lives. Since our last issue we have all had to come to terms with ‘lockdown’ and ‘social distancing’, as the grim toll of deaths climbs in all regions. Here at BCInsight we are working without an office as best we can, and issues of Sulphur will continue to land in your email inboxes, but paper copies of the magazines may take longer to arrive, if at all, as shipping and customs procedures are tightened all around the world, and I can only apologise and ask that you bear with us.

This year appears to be determined to illustrate the limitations of forecasting. Projecting trend lines into the future, looking at expected completion dates for major projects and global economic projections are all worthwhile activities, and can provide valuable insights for business people, but any prediction is apt to be derailed by what one of our prime ministers supposedly once described airily as; “events, dear boy, events.”