Increased sulphur output from US Gulf coast and Canadian producers helped balance the North American market in 2023, but a glut of sulphur will likely suppress export pricing heading into 2024 after a recent slowdown in global demand.
A slowdown of spot purchases by Chinese buyers has maintained downward pricing pressure on the global sulphur market, especially in the fourth quarter as Chinese port and river inventories reached their highest levels in around three years. Argus estimates phosphate fertilizer producers are operating well below capacity because of fertilizer export restrictions implemented by the Chinese government. The low demand from those producers combined with adequate stocks has required traders to place marginal volumes elsewhere and raised competition between suppliers.
Waning demand from China has weighed on Vancouver sulphur pricing, which has fallen by 25pc since the beginning of the fourth quarter of 2023 to $72/t fob on a midpoint basis on 14 December as suppliers compete to secure shipments and climbing freight rates trim fob values.
Sulphur output in Alberta is likely to reach record highs as bitumen and heavy, sour crude production bolsters sulphur production in the Canadian oil sands. According to the Alberta Energy Regulator (AER), sulphur production from January-October 2023 climbed by 386,000t, or more than 11pc from the same time in 2022 to 3.78mn t.
Previously in 2023, suppliers were pulling tons from sulphur stockpiles, with market participants saying that suppliers were remelting, or preparing tons of solid sulphur inventory to shipment, to keep pace with demand from exporters. But as market sentiment has weakened, remelting operations may slowas falling prices squeeze high-cost tons out of the market.
In the US, increased shipments to Brazil, Morocco and Mexico have helped to balance the market amid higher output from refineries and natural gas processors. This trend will likely continue in 2024, but increased competition from other exporting regions to secure deals is expected to weigh on pricing in the first half of the year, despite relatively healthy margins for phosphate fertilizer producers.
A softening domestic sulphuric acid market and uncertainty surrounding domestic phosphate fertilizer production is expected to trim domestic sulphur consumption, which fell by about 6pc in the first nine months of 2023 relative to the same time in 2022.
Sulphur production in the first nine months of 2023 has totaled just over 6mn t, according to the US Geological Survey (USGS), only 20,000t higher than during the same period in 2022. Sulphur output from each US region declined year over year except for in the Gulf coast, where production during January-September 2023 climbed by around 3pc from 2022 to 3.57mn t, according to the USGS.
Abundant supply and lagging demand has kept sentiment relatively bearish for early 2024. Market participants expect the first quarter Tampa settlement to track recent spot price development in Vancouver and the US Gulf coast and decline by $30-35/long tonne (lt) into the mid-$60s/lt to low-$70s/lt delivered.
