Sulphur production in North America will likely be lower in 2020 than 2019, but slower phosphate demand growth and plentiful global availability will weigh on prices.
US refiners have already begun preparing for the incoming cap on sulphur content in marine fuel that take effect 1 January by prioritizing lighter, sweeter crudes over sulphur-laden heavy sour. Spurred by changes to the crude slate along the Gulf coast, from January-September 2019 US sulphur output fell by 10pc compared to last year to 6mn t. This reduction is likely to be sustained, as refiners continue to favor lighter, sweeter crude feedstocks into 2020.
Exports out of the Gulf will likely rise from February 2020 as US terminal operator Martin Midstream replaces a shiploader at its Beaumont terminal to replace another that collapsed during a May 2019 storm. Exports of prilled sulphur have been heavily restricted since May, leaving US producers with little option but to sell within the US. Offshore values, while depressed, are likely to return higher netbacks to some Gulf refiners than domestic business. US Gulf exports typically have a freight advantage to Brazil versus supply from other typical sources, and may displace some Russian supply as the year progresses.
Developments in the phosphates market will be critical to the US sulphur balance.
US phosphate prices fell to decade lows over the past year as weak demand and rising production left the market awash in fertilizer. Rising exports and crop acreage growth in 2020 may contribute to rising prices. Argus forecast P2O5 consumption next year at 6pc greater than during the 2018-19 season on higher planted acres for corn and soybean.
Global sulphur production capacity will grow in 2020, particularly in the Middle East. Rising production from these new facilities coming online may dampen any price hikes seen in the coming year. Sulphur demand will grow in the key Chinese market, although rising domestic production and plentiful port stocks will temper the growth rate for imports in the coming year.
By Reginald Thompson
