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The HC Commodities Podcast
Sulphurous Times with Meena Chauhan
00:43:28
Sulfur is a lynchpin commodity, connecting the oil and gas industry to food production and much more. Already in a structural supply deficit, now, nearly half the world’s internationally traded sulfur is off the market with the shutting down of the Strait of Hormuz. There is no clear line of sight as to how quickly supply could return with potentially catastrophic consequences for the world. What is sulphur (sulfur), how and where is it produced and what is it used for and why is the world not talking about this? Our guest is Meena Chauhan, Senior Manager over sulphur and sulphuric acid research at the consulting arm of Argus Media.
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- [00:00]
A
Foreign. Welcome to the HC Commodities Podcast, a podcast dedicated to the commodities sector and the people within it. I'm your host, Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the commodities sector. Today we are talking sulfur, among other things, a key component in fertilizer production. The market was already in a structural supply deficit prior to entering this year, and the closure of the Strait of Hormuz has effectively shut in roughly half of the globally traded sulfur. What has that done for price? What does that mean for food? What does that mean for global trade, and what does that mean for the sulfur industry? Our guest is Meena Choam, senior manager over sulfur and sulfuric acid research at the consulting arm of Argus Media. As always, you can really support the show by leaving us a positive review on the platform you're listening on, and I hope you enjoyed the episode. Mina, welcome to the show.
- [01:07]
B
Thank you, Paul. Good to be here.
- [01:08]
A
Yeah, thanks for doing it. Here by popular demand is sulfur and sulfuric acid and a long time coming. And it couldn't be more topical than right now. So we're talking sulfur, we're talking basics of the market, then walking through demand supply and how the trade flows have been impacted, obviously by the recent events in the Gulf, which are currently ongoing. Can we get all on the same page, especially me at the very start, and can you just tell us where is sulphur produced, how is it used? And then we can do some basics of trade and volumes and so forth. But let's. Let's start with the basics. Where is it produced and why?
- [01:44]
B
Absolutely, sure thing. So on the production side, the largest region is the Middle east, and that's followed by Northeast Asia and North America. In terms of how it's produced and how. How this chemical comes to be, it's through a byproduct process. So it operates quite differently to other commodities that are produced on purpose for that reason. And it's a byproduct of the oil refining sector and the gas processing sector as well. And probably worth noting that it's sour. When we talk about gas, it's sour gas. And when we talk about refining its sulphur content within the feedstock, that's important. So, for example, a refinery that only utilizes sweet or light crude wouldn't have necessarily sulfur content.
- [02:31]
A
And I'm guessing this is consequential because currently lots of oil is being processed that's light and sweet in the US for example, and not heavy and sour. Right, okay. Good stuff. Sorry, carry on.
- [02:41]
B
Yeah, no, indeed. So that's the sort of two key ways it's produced. There are other ways it can be produced, for example, over in western Canada from oil sands. And that is a much smaller portion of overall production. And if we think about last year and use that as a base, global sulphur production was around 72 million tonnes outside of those regions. So the Middle East, Northeast Asia and North America. Next would then be Russia and Central Asia, so Kazakhstan and so on. And the other thing to mention as well probably is on the voluntary side of production. So historically, if we were to go back many, many decades, the way that sulphur was produced was from mining. This is, of course, no longer the case because of the rise of fossil fuels and so on. In the last few decades, this is pretty much all died out except for in one location, and that is in Poland. There is one active sulphur mine there today where sulphur is produced directly from a process there, however, that is not prevalent anymore.
- [03:43]
A
Yeah, there's a quite a sad. And apologies to any residents who definitely aren't listening to this podcast, but town sort of 50 miles east of Houston called Sulphur, which, you know, back at the turn of the last century was a thriving little town producing sulfur. So. Yeah, no longer.
- [04:00]
B
Indeed. Indeed. Yes.
- [04:02]
A
So that's voluntary. That's obviously producing it not as a byproduct. Is it also a byproduct in some metals processing as well? And can you give us some. You know, is it. Is it sort of 95% just is essentially tied to oil and gas processing?
- [04:16]
B
Yeah. So in terms of the metal side, it wouldn't be sulfur that is recovered, that would be sulfuric acid. So it's completely different chemical and commodity, essentially, even though there's, of course, the link. And really you use sulfur to then make sulfuric acid in some processes. And then if you were talking about metal smelters, for example, a copper smelter or a zinc smelter, the product out of that as a byproduct would be sulfuric acid. So it's two slightly different markets there.
- [04:45]
A
Right, okay. And. Okay, so then what it says, so that's how it's produced 72 million tons of the stuff a year. Its challenge is that it's primarily a byproduct. But what is it used in and what are the key uses for it and what form is it used in those uses?
- [05:01]
B
Sure. So the majority of sulphur is used to make sulfuric acid. So it's roughly 90% of that. There's only about 10 or 11% that is used in its what we call elemental form, so as sulfur as it is. Otherwise, once it's produced as sulfuric acid, the key end use is really around the fertiliser space. So the number one end use for sulphur is phosphoric acid, which is used to make phosphate fertilisers. And then there's a other range of fertilisers such as ammonium sulfate and so on. And then outside of the fertilizer sector, it's the metals leaching sector. So we have nickel, which I know we'll touch on a little bit later. Nickel represents about 8% of total sulphur demand last year. And much smaller end use in terms of elemental sulphur is copper. Obviously, when we talk about sulfuric acid, copper is a much larger portion of that. And that's because the byproduct, sulfuric acid from smelters is largely used within that space. So it's slightly different in terms of the metal side. So we've got nickel, copper, and then we also have a small portion of sulfur demand that goes into uranium. So that's another leaching process. And then there's a whole host of different chemicals in the industrial space, which forms about 17% of sulfur demand currently. And that would be a lot of different things. And there's all sorts of. Citric acid, for example, is one. It's used within the refining sector. And we have titanium dioxide as well.
- [06:36]
A
And what does it do for titanium?
- [06:37]
B
So that is used again in a leaching form. And titanium dioxide is then used as pigment in paints and things like that.
- [06:45]
A
Yeah, we did an episode on titanium and a new process a long time ago. Okay. So the vast majority there. And this is, I guess the story is very much one of fertilizer in some sense. How is sulfur traded in its elemental form in sulfuric acid or in subsequent derivatives in products associated to the phosphoric acid and so forth. Can you give us some sense of how it's stored and shipped?
- [07:09]
B
Absolutely. So it's traded in different ways. So one, the main way in terms of seaborne trade would be as dry as a dry bulk commodity. So it's loaded in different forms. You can get prills and granules and things like that in what we call solid sulfur form. So that's the primary way that sulfur is moved around globally from sellers to markets. And then there's another form of sulphur, which is in liquid form or referred to as molten sulphur. And that's where sulphur is heated to a certain temperature and it maintains a liquid form. And that would be transported in tank in specialised molten tankers that would need to maintain those heat levels and those would be on a much smaller scale. So the majority is around dry bulk, really. And in terms of how it's sold between buyers and sellers, there's a range of different ways in terms of the structure of the market, some of these are contracts. So volumes would be agreed directly between suppliers and end users or using traders. And then prices could be negotiated on a quarterly basis. And then there's a portion of the market, of course as well, which is sold on a spot basis. So as and when there is availability, sellers will put volumes up for sale on a cargo by cargo basis. In the Middle east, there are also several producers that announce sulphur prices on a monthly basis. They have official selling prices. So the likes of adnoc, kpc, for example, Qatar Energy, they would every month announce a price and that would be their, their official price for there.
- [08:44]
A
Yeah. And I want to move on to pricing in a moment because I'm kind of interested. Where there is negative pricing is they've got to get rid of it. But let's get there just a moment on sulfuric acid. So if sulfuric acid on right. Is sort of the precursor for most of these fertilizer products, how does sulfur get turned into sulfuric acid and the sulfuric acid then have an entirely different group of traders dealing with it and trade flows and so forth?
- [09:06]
B
Yes. So in terms of sulfur, you would need a, what we call a sulfur burner or a sulfuric acid plant. These tend to be attached to downstream processes. So you'd get like an integrated fertilizer producer which would have their own sulfuric acid plant. They would buy the sulfur and in that plant there'll be a process and by the end of it they have sulfuric acid or H2, SO4 in its chemical form. And that would be the raw material that they use as well. And so that would really form, you know, the bulk of where sulfur is going.
- [09:38]
A
Okay, and are those downstream fertilizer plants typically adjacent to refineries or are they in more in the destination locations and do sulfuric acid cargoes. I know they do. They come up for sort of in that spot market as well and so forth.
- [09:53]
B
Yes. So generally speaking, the sites of the downstream, whether that's fertilisers or metals, won't be linked to particular refineries. As a general, there will be cases where that, that does happen, but it's usually more to do with other raw materials that would key, for example, phosphate rock. If you're a fully integrated phosphate producer, there wouldn't necessarily be that link. And that's why, I guess, that traded market is so important for sulfur. Just going back to your other question on sulfuric acid and how that would link in. So there is a portion as well of what we call merchant sulfuric acid, and that would be traded in a different way and priced in a different way as well. And there is a link, of course, between the two markets, but because of the nature of sulfuric acid obviously being corrosive chemical the way it's shipped and so on, whereas with sulfur, of course, in a dry bulk form, there's very different handling capabilities.
- [10:46]
A
Yeah. And so for this story, for the most part, we're focused on sulfur as sort of the core, core commodity and the precursor to all this stuff and the consequential story when it stops getting produced in a normal world. How does this stuff priced? Is it priced to get rid of it? Because if we can't get rid of it, the refinery starts backing up, like in general, how does sulfur price and does that change geographically and so forth?
- [11:10]
B
That's a really good question, actually. And I would say this has changed over the years because, you know, prior to the 2007, 2008 financial crisis and the bubble, sulfur, I think was very much priced in that way as far as it's considered a byproduct, some might have said at that time, even a waste product. Nobody says that anymore, but back then that's what they were, you know, referred to it as. And it was very much around getting it moved. And that was kind of the thinking behind it. However, once we got to 2007 and prices reached, you know, the heights of the eight hundred dollar a ton, nine hundred a ton range, the sentiment around what sulfur is as a commodity really shifted. And I saw that. And really now we don't really see negative pricing. It's just not the way the market has shifted. And that's really because of the demand growth and the demand sectors and because of that need and requirement, because it doesn't operate as a regular commodity, I. E. When prices are high, nobody's producing more sulfur or vice versa. When prices are low, then there's kind of a different way that it's approached, I think, in terms of the, you know, the buyers and the sellers and so on. And now, as I said earlier, so contracts and these are, you know, negotiated every single quarter in some cases. And there's of course PRAs like us at Argus Media and we assess global prices and there will be some players in the market that would utilize PRAs and perhaps have prices based off of formulas using those assessments that we cover.
- [12:50]
A
Interesting. Is there any sense that it's kind of been the rise of shale, that light sweet crude you spoke of that has kind of turned sulfur used to have all I guess from a sort of a waste to now as a valuable byproduct because there's just less heavy crudes being processed out there. I was. Am I making that up?
- [13:09]
B
I think that's been part of it, but it's been a broader shift, I think towards lighter, sweeter crudes. Not necessarily just on the shale side, but also the move towards electric vehicles and so on. So we've got regionally quite different things happening with that. Western Europe is a good example where we have seen a real shift towards a shortage of sulphur because of what's happened in the refining and the gas sector as well. Whether that's depletion of resources linked to sort of economics as well, not just necessarily environmental reasons, a lot of conversions of terminals to renewable fuels and things like that that has led to a downturn in some regions like Western Europe, North America. We've seen something similar in the US and also in Western Canada with a depletion of sour gas based supply and yeah, on the refining side as well, that has been a trend that we have seen but. And on the other hand elsewhere we've seen the complete opposite trend as well. So it is very regional in terms of that.
- [14:09]
A
It does make me wonder whether I should go and buy some mineral rights in Sulphur East Texas on the basis that what happens in the energy transition when people are no longer processing all these heavy crudes in 50 years time and how are we going to get our sulfur? I mean, is that a topic that comes up or again, am I kind of making things up?
- [14:28]
B
No, you're right on. This is probably one of the most asked questions really about the future of the sulphur market, of future sulfur supply as the whole world appears to be moving, you know, towards electrification, whatever that looks like, and what the case will be for, for all these downstream end users as well in terms of being able to source that supply. So there's a few different things I suppose to consider. One is that yes, you know, particularly on the oil side, we see that our crude team looks at China and things like that. And we see of course like crude oil demand reaching a peak or if not already having Peaked in places like that. But then when you look at investment that is being made in large scale really sour gas projects in the Middle east, for example, and they're very sour. So they have what we call high hydrogen sulfide content, which is where the sulfur would need to be recovered. And the scale of these projects are so, so large. And some of these, you know, in quite early stages of development, we'll be seeing them play out in the next five, 10 years. There is still a growth story in some regions, at least for additional sulfur supply to come. So I think it'll be more a situation of where we have certain regions with growth, other areas declining and that trade picture shifting the further out we go and increasing focus as well on stocks of sulfur and how it can be stored. And one other thing as well that we are starting to see a little bit more of is innovation in the, I guess the technology space for sulfur for this reason with different bits of development and investment in how sulfur or sulfuric acid could be recovered in other processes.
- [16:10]
A
I was going to say, I mean like a lot of this stuff is 200 years, you know, coming up to 150 years old in terms of technologies. And I, you know, so there is the opportunity there. But I guess also this is such a consequential story because a lot of these assumptions are based on continued investment in the Gulf states and their oil production, which whilst it sounds farcical to say this, it, you know, is now possible. Reality is we could expect that level of investment to drop off quite significantly for a period, especially depending on what the outcome is in Iran. Let's, I've really appreciated that. That's been fantastic. I'm going to, I am indeed going to go and create a sulfur consortium in East Texas and in preparation for my grandkids. But that aside, let's talk supply. So perhaps, and, and, and, and thank you for your notes on this and obviously your experience here. But if we can rewind to that, I guess, you know, looking at it sort of November or late last year here and set the scene there and then that, that will nicely set us up for what's going on right now.
- [17:09]
B
Important to know, I think that really 2025 was a turning point for the sulfur market already prior to the war. And that was for lots of different reasons. One was that we had Indonesia entering the market through the latter part of, well, most of the year, but really in the latter part of the year as well. And the reason that's important is because, you know, historically Indonesia hasn't been a significant player in the global sul market. They need to import their needs because they don't have large production. And there's been huge investment from China and Indonesia for the nickel sector. And as a result, their need for sulphur increased significantly. They imported over 5 million tons of sulfur last year. And just to give context, you know, globally sulphur Trade was roughly 40 million tonnes last year. So it's quite a big portion of that. And because it wasn't for the fertiliser sector, we did see prices rising quite significantly to meet that demand. In addition to that, Russia announced an export ban on sulfur that was in November. And so that already ended up tightening, really, availability through the fourth quarter and coming into the first quarter. And so there were a few different things happening already that led to the sulphur market being in what we call a structural deficit. And that was in that lead up to, you know, the end of, end of February, early March, where we are now.
- [18:32]
A
Okay, okay, so structural deficit then. All we know what happens next, but let's start with, I guess. Well, a lot happened in Q1. Is there. Is there a Venezuelan story here at all?
- [18:42]
B
In theory, yes. But actually on this, in terms of sulfur, there hasn't really been a material impact as yet. And that's because Venezuela does not really active in the.
- [18:52]
A
It doesn't really have the kit anymore.
- [18:54]
B
Yeah, it's more to do with where their heavy crude will go and then be refined. And that would be where the sulfur recovery would come. So, you know, potentially an uplift in some of those US Gulf refineries that are set up to, you know, utilize heavier crude, sour crudes, but we're not yet really seeing that have an impact.
- [19:12]
A
Okay, well, let's. So we all know the story. US Israel attack Iran and the Strait of Hormuz is effectively shut down within hours. And a bit of the story we don't know, of course, is what's going. The actual damage done to infrastructure, this delicate, highly valuable infrastructure in the region, which is obviously both production as well as refining capability. Can you just break it down for us? Who was producing what sulfur in the region and what's happened since the Strait shut down? Has any gone out? And what do we. What do we sort of know about damage and so forth? So a lot there, but yes, unleash, basically.
- [19:49]
B
Sure. So just some context then, first of all. So in terms of the share of global production, the countries that use the Strait of Hormuz, it's roughly a third, just over a third. So a Huge chunk of global production. But more importantly, the share of global trade is larger. So it's about 50% of that 40 million tonnes I mentioned earlier in terms of what we saw last year. So around, you know, close to 20 million tons of supply. That would be on an annual basis, cut off. That's the first thing.
- [20:20]
A
Just, just understand that that's consequential. So the, in some ways the percentage of global production is misleading because this is a key source of, of, of traded sulfur, I. E. This is what goes around the world to various fertilizer plants and there's a vibrant market in solving kind of fertilizer demand, if you'd like.
- [20:37]
B
Exactly. And I think some people as well get, you know, quite interested. Okay, so what about the rest of the market? But, so for example, if we were to talk about, say, the largest sulfur producer in the world in a country level, and that's actually China, but they are not an exporter, all of their production remains domestic. I think that's why the, the trade number, the export number is more important in terms of that impact to global markets.
- [21:01]
A
That's why. How consequential. Can you break that down a bit more in terms of countries and then obviously then what's starting to happen.
- [21:07]
B
Absolutely, yeah. So in terms of the exports and the countries that would be leading. So we have the UAE leading last year in terms of the Middle East. So that 20 million ton mark, roughly 34% of that was the UAE. After that it's Saudi Arabia and then Qatar, also Kuwait, of course, Iran itself. Iran itself is, you know, a smaller, you know, in that global trade picture, roughly 4% when we look at it. And so it's not really the Iran story, but it's all the other countries in that region. So those would be the main ones. Iraq as well is a, is a much smaller one, about 2%. And then outside of the strait, but in the Middle East, Oman as well, roughly 3% of that trade figure as well. So, so it's important as well with all the, you know, the damage that's been done. So I think consider the effects that we will expect to see beyond this very short term because of the time it will take to bring things back online. Some will of course be quite quick because they've been taken offline as a precaution. But the sites that have been affected by drone strikes will of course need to be assessed in terms of the overall length of time in capacity terms. When we were looking at, okay, we're going to look at every single plant that's been taken offline in capacity. So this is slightly different from production obviously because operating rates can vary. It's roughly 17 million tons of sulfur capacity that was initially affected by the strikes. Whether that led to damage or whether they were taken off voluntarily and remained offline mine for concern over risks.
- [22:50]
A
Okay. And we don't actually know of that. 17 million tonnes. We don't know how much is damaged and how much is just idle.
- [22:57]
B
Indeed. Yes. So we're, we're still, you know, there's still assessments that are ongoing in terms of that and so we'll, we'll be keeping a close eye on that one.
- [23:06]
A
Out of interest, can this stuff, you know, can it be trucked over land and then loaded in different, you know, is it easier than obviously having to build pipelines and so forth? In other words, you can get this to kind of Oman relatively easy. Easy or not?
- [23:19]
B
I wouldn't say relatively easy, but it can be done. And we are seeing some things happening but on a very small scale. So for example, in Saudi we have Yanbu and that's a potential point of export as well, but on a much smaller scale than Jubail would be in terms of within the strait. So yeah, it's not a straightforward answer really but I think these are all the things that are being looked at now to see how the longer this goes on, what can the consequences be to of trade routes and trade flows that may change and shift.
- [23:54]
C
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- [24:27]
B
Learn more@encoinsight.com and then this has had
- [24:32]
A
a knock on impact on other countries. Now you know, thinking about export bans as well, beyond just Russia and one or two others. But so you know what's going on in Turkey, India and other places like that, you know, as countries start to see the long range impact of this,
- [24:50]
B
there's definitely a concern over security of supply. So Turkey has issued a sulphur export ban which is now taken come into force as of this month and then India is understood to be considering an export ban. Obviously they're not a major player in terms of exports. However, there is a huge fertilizer industry domestically that usually relies on Middle Eastern imports. So it's understandable as to why this would be under consideration. So that's just at this point, not confirmed, but just something that is being considered. I wouldn't be surprised if we do start to see other nations looking at this as a, you know, a critical situation because that's what we are in now with that, you know, that downstream consideration across the whole supply chain from, you know, fertilizers, metals and everything else that it encompasses. And when we look at how sulfur is used, I think, I think this is going to have long lasting consequences beyond just this year now.
- [25:53]
A
And again it comes back to that question, that sort of equation of impact equals time times by damage kind of thing. We don't know the damage bit and we don't know the time bit. And the other bit of course is, and it sounds bizarre even to be saying this, but demand destruction can't happen in sulfur in the same way it can in, well, that would have disastrous consequences as it would, you know, as opposed to rationing diesel for driving and jet fuel for executive trips and so forth. Right. What has happened, you know, what has happened to sulfur prices right now if indeed you can't even price it?
- [26:27]
B
Okay, great question. So on prices, if we look at prices that Argus assesses, which we do on a daily basis for sulfur and also on a weekly basis in the global markets. So since January of this year, we've seen an increase in sulfur prices of between anything from 40% up to 79%, 80% in some cases. So they are rising. I'll just go backwards slightly though, because if we look at the prices today, compared to January of 2025, prices have gone up by 400%, 500%. And that was really because of the reasons we talked about earlier and all the things that happened towards the end of last year that led to that structural deficit. And then with the war coming on top of that, we're now talking about prices. For example, if we were to take Brazil or Indonesia as some of the key import markets, we're talking about nine hundreds plus dollars per ton of sulphur today and it's still rising. So we also do run of course, forecasts on the market and our expectation is that prices are going to continue to rise in the very short term. So we've ended up now in a scenario where prices are at a premium in terms of a raw material cost for all these key downstream end uses. And you know, going to linking it back to that demand destruction question, I mean, there's two Two things here, I think. One is the prices, so we've got industries in negative margins now. And then the second is availability. So we are seeing some demand destruction for both of those reasons. And in some cases it's the who can get the tonnes and pay the most for it. And that's the situation we're in now.
- [28:12]
A
Yeah, yeah, I want to get there. One more question just on supply, because it is consequential, is firstly, were there any stockpiles you mentioned at the very start? Sort of this and I assume in 5 years time every country is going to have a strategic stockpile of sulfur like all the rest of this stuff. But really there's very limited supply response. Right. It's relatively inelastic because we don't have lots of spare capacity out there. And even. I'm just looking at your notes, Western Canada, where there is this sort of block of 10 million tons of the stuff, there's just not the infrastructure to act. We can't go back to mining overnight, basically.
- [28:46]
B
Indeed, yeah. The storage question as well, I think is up there as far as the key interest in the industry now is the future of storage and also for North America, how to access some of that. It's out in Western Canada there is significant block, what we call block form, which is where it's, it's poured, it's in a liquid form. The sulfur gets poured into a vat essentially and as it solidifies, it creates and they pour on top again and again and it rises and it's sort of this huge thing you can see from space, apparently.
- [29:15]
A
So it's a.
- [29:16]
B
It's in liquid form in the ground initially. So when it's heated, it's in liquid form. And then as you pour it, obviously as it cools, it solidifies then.
- [29:24]
A
Yeah.
- [29:24]
B
And that's how they can create these what we call block literally are like blocks.
- [29:28]
A
I mean, I mean Canada just has everything, don't they? Indeed. Like, you know, I mean, talk about making. I made the joke on a podcast the other day about making Canada great again. I mean seriously, seriously the place to move in a. You know, they'll be. It'll be warmer and has all the, all the nature's bounty as well, that aside. Okay, so let's go on to demand. So obviously we're seeing demand destruction and we've got these different use cases for salt, sulphur, there's fertilizer, which is, you know, mission critical for humanity, but also metals and other chemical processes. Where and how are we seeing that demand destruction play out we're already seeing
- [30:06]
B
it in the fertilizer sector. So there have been major producers of fertilizers or phosphate fertilizers announcing cuts and containments because of the lack of raw materials. So it wouldn't necessarily just be about sulfur, but the other key raw material within the phosphate fertiliser space is ammonia, for example. So, so it's, it's already on its way. So in places like North Africa, also in South Africa as well, and, and that's been linked to availability elsewhere. We've seen in Indonesia there have been some announcements from the nickel producers that they will be curtailing some of their production as well in the short term during this period. So really it's across the board at the moment. And I think fact that if we're talking about 50% of trade is now switched off for the time being out the Middle east, that automatically means there is demand destruction because there is no replacement for those volumes. So I guess the full consequences of this demand destruction won't be felt yet. It'll be, you know, down the line as those supply chains shift in terms of the downstream products, essentially. So for example, with fertilizers as well, or in that background battery material space as those, you know, those cuts take force and we'll see how that all plays out.
- [31:24]
A
Yeah, I've been guilty of saying this as well, but to run it by you, to stress test it, there's sort of this idea that we're somewhat okay because we're not in peak fertilizer demand, growing season, etc. And hopefully the, everything will be back to normal by the time, you know, we get near the next wave of fertilizer demand for the Southern hemisphere? Is that an old story now or is that ever a valid story, you know, or are we sort of in high price, very high prices and flowing into fertilisers for quite some time?
- [31:54]
B
Okay, so I think the piece to mention here as well that it's not just been about the war. So because prior to this we were already in a deficit. So we had already started to see a lot of the, you know, fertilizer producers and so on, you know, reducing their sulfur imports, for example, example ahead of what we saw happen February, March time. And so, you know, the supply chains were already starting to get a bit stretched in, in terms of that raw material availability. And a lot of end users were moving to, you know, using their own stocks, whether that's at ports or in the hands of traders or whether their own stocks. And you know, we've Got, I guess when we look back as well, crop prices haven't been particularly helpful as well. And so we were already in a situation, I think with high priced fertilizer products prior to this and you know, farm level as well. This was already having, having an impact. So I don't, you know, I don't see that even given being off season in certain regions and so on is going to be necessarily helpful because of how we came into that, that period of time.
- [32:56]
A
Yeah, yeah. Which is rather depressing. And then have we seen. So what has it been the knock on effect of the sulfuric acid market that we mentioned earlier on? Is there any stores there that have been drawn on?
- [33:07]
B
Absolutely. So as soon as this happened, really we saw a lot of the sulphur end users turning to the merchant sulfuric acid market initially to see if they were able to procure tonnes in that, in that sector. And you know, in some cases end users that have their own sulfuric acid plants are able to then make that switch and just buy in some acid to supplement their raw material requirements. But that has now resulted in some other actions. So we've got over in China, for example, there is a, a Chinese restriction on sulfuric acid exports as a result of, you know, the sulfur deficit right now. And that's ended up creating extremely high prices in the merchant sulfuric acid market and a very tight and short market as well there. So that's also now had a, you know, a huge impact in a very short space of time.
- [33:59]
A
Yeah. And as you mentioned, most of that's the Chinese stuff is used internally and I guess there's also concerns there as well because where there is spec about capacity in all those teapot refiners, most of those would be then impacted by sanctions as a result of, you know, using Iranian and Russian crude as well. So even the ability to buy that stuff, I imagine is, is a challenge indeed.
- [34:22]
B
Exactly. And the China story is quite interesting because it's a net importer of sulfur, but they're actually an exporter of sulfuric acid. They're actually the largest, you know, exporter globally, or at least they were last year. So they exported, I mean, and then the global acid trade market isn't very large. It's roughly 20 million tons or so in terms of what's traded every year compared to, you know, production of like 300 million tons annually. So their exports of, you know, 4.7 million tons last year. The markets rely on this, you know, raw material, particularly places like Chile where they need it for their copper sector. And so I think it can't be, I think understated now with both sulfur and acid raw materials both being tight and these prices that, you know, how serious of a situation we are now in.
- [35:17]
A
Yeah, I guess that's the kind of it feels like, albeit with the price rises that we've seen. You're speaking about half the sort of globally traded sulfur off the market. And I know that there's sort of this, we're in this strain change Doomberg described at this moment as kind of a Schrodinger's cat, where it could go either way and we just don't really know. Right. I mean, it could all open up tomorrow. We don't know the damage and time is ticking on and it will take a long time for all this to fire back up. And then you have that. And I want to come on to the long range in a minute. But just at the moment, you've had half this globally traded sulfur taken off the market. What's the scale, scale of alarm at this stage? Are we sort of, Is everyone sort of. Is this being spoken about at government levels? Are firms walking, are the, the ag houses, the fertilizer houses walking around saying like, this is a, you know, a massive problem with very little solution available other than demand destruction via price and, and then cascading export bans and a destruction of a globally free market that has fed the world. I mean, I don't want to get too dramatic, but when you're in your travels and meeting with clients, you know, at conferences and so forth, like what is the scale of alarm, you know, right now? Are we DEFCON 4 or is that shoe yet to drop?
- [36:35]
B
It's interesting because when we think about sulphur, it's a byproduct. There hasn't really been a lot of attention on it to this scale before. So I don't know that you know, at government level there is that much scrutiny on the sulfur piece. It will be more, you know, along the lines of securing fertilizers and energy sources and so on. So I think that the sulfur piece is more in terms of the panic or maybe let's call it concern is really within the industry, the players operating within that. And yes, there is extreme concern about the current situation about the next six months, about the next 18 months, two years really of the sulfur market and how it's going to be addressed. As you said, very little that can be done done. It's a byproduct. It. Nobody's going.
- [37:26]
A
I'm right in thinking it is the linchpin. Right. I mean, essentially all the. It is the link, the linchpin between energy production and fertilizer production.
- [37:35]
B
Yeah.
- [37:35]
A
And you know, and the infrastructure both reduce it as well as to convert it. It takes a long time to build. But essentially all those discussions at some point will come back to the flow of sulfur. Right. Which is why you're talking about stockpiling and so forth. But it just seems fascinating. Yeah. At the moment it seems sort of somewhat, sort of academic and slightly shrill to sort of be saying, well, this could very easily tip over into a food crisis. And again, because it all could open up tomorrow and we know the political goal is to do that because it's just so painful domestically for the US administration. But that's fascinating. It's not quite hit the sulfur's not on the front page of the FT yet. Right. It's more sort of risk of fertilizer, risk of energy. Energy. But I can imagine a world where sulfur is up there and, and yourself is a. Is quoted in it.
- [38:23]
B
Indeed. Yeah. I guess the fact that we now have countries that are installing sulfur export bands does indicate a level of awareness to that, you know, to that end. But not enough yet, I don't think, because, you know, we still have, of course, you know, exports from, you know, India still ongoing until that actually materializes. And if, if it even materializes, that they decide to place a ban on that trade and securing their own, you know, supply of this key raw material. Yeah, for sure.
- [38:53]
A
Does India have domestic fertiliser production?
- [38:55]
B
Yes, it does it import. It's a huge importer of Finnish fertiliser products and is also a large producer and therefore consumer of sulphur.
- [39:03]
A
Yeah, interesting. Okay. And I know this is going to be very hard, but if we were to say, you know, roughly speaking, conflict over in the next couple of weeks, there is damage, obviously, we know the damage to the container, Qatar LNG and so forth, but things roughly start going back to normal. Is there an argument that actually we're now in a structural long term shift up in the price of sulfur because it is essentially a critical mineral or, you know, it is a. People will be stockpiling it and there won't be the same. It's arguable there won't be the same level of investment in crude production, gas production and refining in the Middle east because of the fragility and value of. Of those in that infrastructure in what will be under the, in the case of a ceasefire or some agreement, basically still having the sword of Damocles held over them. Big question. But what's your sort of sense there? What is the longer range discussion going to be?
- [39:58]
B
It's sort of twofold really. So you mentioned of course that the time it will take to so if everything opens up tomorrow, the time it will take to get all the damage sites back to production. But then it's all the investment that's already, already in, that's taken place. So we had a whole host of projects that were due online this year alone in Iraq, in Bahrain, an expansion there in Saudi Arabia as well on the gas side. And all of these projects were meant to be, you know, shifting that balance this year. These are now all pushed in terms of their timelines. So many of these are already constructed. So the ones that are obviously already the Capex is in, we would expect those to be coming online later down the line. Those timelines we're currently pushing through in that 2027 of timeline at the moment. And then you've got the larger projects like Qatar's Northfield expansion project on the LNG side, which was meant to yield over 3 million tonnes a year of sulphur capacity at the moment. We're now, you know, thinking about pushing that through into, you know, 2028 sort of time frame. And so there are, you know, projects that will be coming online even in this very, you know, sort of risky geopolitical climate eventually. I think the issue be the projects that have not reached that point yet that were under discussion, that were in development. And I think that that's a really important question. I mean, taking a step back and outside of the Middle east, we're obviously looking at, you know, other regions, particularly in terms of where we see the investment in the refining side is actually over in China. Even with that, you know, that move towards electric vehicles in China, we there is a whole host of projects that are due online. There's two that are coming online in the next six week frame atrophy, which we'll be adding to that sulfur balance. So I really see the next two years as being the time where we end up in this tighter period, that deficit, higher prices for sulphur and then as we move towards that 2028, 2029 time frame, that's when in theory, if all of these projects we're tracking do materialise and come online, we would then see a couple correction, a more meaningful correction in prices.
- [42:14]
A
Yeah, this is probably really unfair, but is there a rough rule of thumb equation that people can use to track the price of sulfur to the price of fertilizer to the price of food. You know, is there sort of, is that a heuristic calculation out there and, and can we use it to divide what. This will have potentially an impact on food prices in general?
- [42:34]
B
Unfortunately, there's not a general rule of thumb.
- [42:36]
A
You should do it. You could. You know the Chowan equation.
- [42:38]
B
Yeah, yeah. I should come up with some think, shouldn't I?
- [42:42]
A
Yeah, well, I find it absolutely fascinating. It's been really excellent to have you on, Mina, and thank you for your time and hopefully we can have you back on in a year's time and it can all be gone back to normal and. And we're back in a world of small structural deficits and so forth and traders doing their thing of solving, solving for challenges in time, location and form and price and all the rest of it, rather than kind of the world we're in right now.
- [43:06]
B
Thank you very much, Paul. It's great to be here and talk about my favourite topic.
- [43:12]
A
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