Consistent sulfur output from North American suppliers should mitigate price volatility that has plagued the US sulfur market for the past 18 months.
Elevated levels of refinery throughputs, bolstered by resilient fuel and oil product demand, combined with increased bitumen processing from Canadian oil sands producers will likely boost North American sulfur output in 2023. This will promote price stability following high volatility that has stemmed from short supply and altered trade flows since mid-2021.
Spot US Gulf coast fob prices traded in a greater-than-$440/t range over the past six months as phosphate fertilizer demand weakened and inventories of sulfur swelled in the early third quarter. Elevated refinery utilization at the same time boosted sulfur output from US Gulf coast refiners, while sulfur exports out of Vancouver are poised to near or eclipse 3mn t in 2022.
US refinery throughputs, particularly at the US Gulf coast, recovered this year to reach a new post-pandemic high of 17.16mn b/d during the week ending 2 December, according to Energy Information Administration (EIA) data. Refinery utilization has averaged over 92pc in the second half of the year as elevated fuel and product demand boost refinery margins, promoting increased throughputs. Gross throughputs at the US Gulf coast reached 9.45mn b/d during the week ending 25 November, the highest in two years, while second-half refinery utilization has averaged just under 95pc.
The boost in refinery throughputs lifted sulfur output in the first nine months of the year by more than 9pc to 5.98mn t from a year earlier, according to the US Geological Survey. The US Gulf coast has, as a result, produced nearly 12pc more sulfur from January-September than a year earlier.
Although a return to sulfur output mirroring levels from 2018 is all but impossible after losing more than 1mn b/d of refining capacity since the end of 2019, rising output is expected to bolster availability, especially in the US Gulf coast where market participants expect increased export availability with domestic consumption dipping from a year earlier.
Phosphate producer Mosaic, the largest consumer of sulfur in the US, throughout the year reported sinking utilization rates and reduced sulfur consumption. This is a trend many market participants expect to continue in 2023, freeing more volume to be exported.
Sulfur exports out of Vancouver reached 2.39mn t from January-October, already exceeding the 12-month total from 2021, based on data from the port of Vancouver as sulfur demand rallied in the second quarter. This boosted spot export pricing from the Canadian port at a midpoint of $478/t fob, its highest since 2008. Just two months later, though, prices had fallen to under $65/t fob as interest fizzled following a downswing in phosphate fertilizer demand.
But boosts to both export capacity and sulfur output are expected to increase sulfur availability from Canada next year. The addition of the south Cheecham priller will boost prilling capacity by 4,000t of wet prilling/day, potentially increasing export capacity out of Vancouver by 5-10pc in 2023, subject to demand from international buyers.
CNOOC's Long Lake facility was also granted permission from the Canadian Energy Regulator earlier this year to restart operations of its bitumen upgrader. Although details surrounding the restart of the upgrader remain undisclosed by the company, market sources indicate that a mid-to-late 2023 restart is most likely.
