Mosaic's board of directors yesterday approved its proposed solid sulphur melter project at New Wales, Florida, according to sources close to the company. Once operational in 2015, the 1mn t/yr plant has the potential to upset North American supply balances and undercut economics for sending Canadian molten supply via rail.
Mosaic has not responded to requests for comment. The facility will allow Mosaic to import offshore solid sulphur into Tampa for onward transport to New Wales.
Galveston, Texas, is the only US location where solid sulphur can be remelted. Mosaic is expected to import solid sulphur into the Gulf Sulphur Services (GSS) facility at Galveston, in which it holds a 50pc stake with Savage Services holding the remaining 50pc, in lead up to the project. The first offshore cargo is expected to arrive next month, followed by a second cargo in July. The volume will originate from eastern Europe.
Mosaic is the largest North American sulphur user, consuming as much as 3.9mn t/yr of sulphur prior to its acquisition of CF Industries' phosphate fertilizer business in March. Following that acquisition, its sulphur consumption could be as high as 4.7mn t/yr, representing around 45pc of North American sulphur consumption.
Mosaic's supply chain consists of sulphur produced in the US, Canada and offshore molten imports from Mexico. Its ability to import solid sulphur from offshore markets has the potential to significantly impact domestic trade flows.
The new plant could potentially back out Canadian molten sulphur supply to the US market because of high rail transportation costs. In 2013, Canada exported 2.3mn t of molten sulphur to the US compared with 2.8mn t of solid sulphur to offshore markets.
If Canadian solid sulphur is backed out of the market at a time when gas processing plants are averse to building inventory, it would force more solid sulphur to be exported offshore. Sulphur inventory being held at gas plants in Alberta was around 1.2mn t as of the end of 2013, compared with 9.1mn t as of the end of 2002.
In late 2015, Suncor will have increased access to forming capacity through its agreement with Keyera at the Strachan gas plant. There is excess capacity available at the location as Suncor is not committed to the entire 1,500 t/day capacity. Meanwhile, there is an additional forming project being discussed for the Fort McMurray oil sands region.
Further compounding the issue are indications that US sulphur consumption is falling. PotashCorp (PCS) will close two plants that consume a combined 365,000 t/yr of sulphur. Its sulphur-based sulphuric acid plant at Geismar, Louisiana, will cease operations by the end of the first half of 2015, resulting in the loss of 150,000t/yr of sulphur demand. Some of this volume could be reabsorbed, however, as regional sulphur-based burners that serve the merchant market will increase consumption to meet demand for sulphuric acid created by the closure. Meanwhile, PCS' Suwannee River chemical plant at White Springs, Florida, will close in the third quarter of this year, resulting in the loss of 215,000 t/yr of sulphur demand.
In addition, PCS' plans to bring in finished phosphate fertilizers from Morocco has led to speculation that it could reduce domestic finished phosphate production and focus on its liquid phosphoric acid production. PCS declined to comment on any changes to its phosphate operations. A decrease would have the potential to impact its sulphur consumption.
Adding another layer of complexity, US sulphur production is stable-to-firmer despite the shale boom resulting in high availability of domestically produced light, sweet crude. But at the same time, availability of heavy crude from Canada has increased which has supported sulphur production in the US. In 2013, sulphur production from crude refining in the US was 7.6mn t, up from just under 7.4mn t in 2012, while sulphur production from gas processing was flat in both years at around 1mn t.
This year, sulphur production is expected to trend higher as more sulphur is produced from BP's Whiting, Indiana, refinery as it shifts to an 80pc heavy crude slate from 20pc as an upgrade project there continues to ramp up. Sulphur production capacity more than doubled to 1,300 t/day from around 600 t/day.
Canadian molten sulphur is not the only supply likely to be backed out of the US market. US producers with ability to export solid sulphur from the Gulf coast could increase commitments to go offshore, even without the economic incentive to do so, to ensure continued movement of the by-product.
The Mosaic development follows an announcement earlier this year that the first sulphur forming unit will be built in Mexico giving it access to the offshore markets. The project, which was awarded to Sandvik, will have capacity of 360,000 t/yr with mechanical completion anticipated in the fourth quarter 2015 with start up in the first quarter 2016.
In 2013, the US imported around 467,000t of molten sulphur from Mexico, up from 365,000t in 2012. Mexico's ability to supply solid sulphur to markets including Brazil and Cuba could squeeze North American suppliers' access to these markets.
US sulphur production is stable and consumption is trending down. This coupled with Mosaic's ability to accommodate offshore solid imports and the impact of Mexican forming capacity could be problematic for North American suppliers, particularly at a time when a global sulphur supply is expected to increase.
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