World Fertilizer - 4

NEW ORLEANS (DTN) -- Much like some other fertilizers, global sulfur (S) prices have increased in the second half of 2017 due to some market tightness. However, the medium-term outlook is for a recovery in supply and slowing Chinese demand to trigger a rebalancing of the market, according to a presenter at the 2017 Fertilizer Outlook and Technology Conference held in New Orleans last month.

VOLATILE MARKET

Peter Harrisson, head of sulfur and sulfuric acid analysis for The CRU Group based in London, said S prices have been volatile in recent years, but for the first two quarters of 2017 the nutrient's price movements were fairly uneventful. Then, in the second half of the year, the situation changed.

"We had some prices move 100% in less than three weeks," Harrisson said. "That rate of change is pretty astounding."

There are no solid answers on why prices have moved higher recently. It doesn't appear companies are attempting to manage supply, which would affect the global price of sulfur, he said.

Harrisson said the nature of the sulfur market is that it is a fairly volatile market in general and large price swings are not uncommon. Many different industries, other than the fertilizer industry, depend on sulfur in the manufacturing process.

One reason for increasing global sulfur prices may be linked with what is happening in China.

Chinese sulfur imports were actually down 16% year-over-year in the first half of 2017, but imports in the third quarter 2017 are up 11% year-over-year, he said. Third quarter imports in 2016 were at 2.78 million metric tons (mmt), but in 2017 that number jumped to 3.11 mmt.

Buyers in China have increased sales in the third quarter of the year to make up the difference for not buying sulfur in the first half of the year, he said. Interestingly, Harrisson sees Chinese imports slowing in the fourth quarter of the year and sulfur imports in 2017 could be 8% to 10% less than last year, around 11.2 mmt.

Harrisson said the fact that China will end up with less sulfur imports than last year drives home the point that the price run-up was probably a short-term, seasonal-based issue and the market will rebalance after a short period of time.

"The message with China, I suppose, is that imports are down while consumption and local production is up and yet you are still seeing this change in this price environment," he said.

LIMITED VOLUME GROWTH

As for the rest of the world, global S importers show limited volume growth, according to Harrisson. Annual global increase is estimated at around only 0.6 mmt in 2017.

Growth markets for sulfur imports include Morocco, the U.S. and Indonesia, as these countries are seeing increasing imports for phosphate demand, a product combined with sulfur to create sulfuric acid.

Declining markets include China, but also India and Australia, he said. Chinese and Indian import demand is declining with local supplies climbing, while Australian imports could fall due to a closure of nickel leaching capacity.

Harrisson said sulfur supply has seen some contraction in key exporter supply availability, with North American and Russian exports having some decreases in 2017. North American exports decline mainly in the second and third quarters of the year, while Russian production is stable but local demand is increasing, which cuts the export volume.

"Two of the world's biggest exporters have had significant reductions in their volume availability and most of that has fallen between Q2 and Q3 this year, which is further proof this is a seasonal factor," Harrisson said.

S DEMAND GROWING

Global sulfur demand is growing faster than supply in 2017 for the first time since maybe 2014 and realistically closer to 2010 and 2011, Harrisson said. The year-to-year change for S demand should be just under 3 mmt in 2017, while the year-to-year change with supply should be just over 2 mmt.

The demand growth is focused in a few industries, which utilize sulfur, including phosphates, industrial sectors and non-acid uses. The growth with phosphate is tied to the capacity expansion with this nutrient, he said.

Harrisson said global sulfur demand in 2017 should be just under 64 mmt, but demand could increase to 71 mmt by 2022. Some growth will be from current projects that have already been constructed and some of this growth will be based around expansion and future investment.

Looking longer term, Harrisson said the market balance for 2017 should be fairly flat compared with 2016. The year 2017 could be fairly tight when it comes to market balance, he said.

This trend, however, could be reversed in 2018 with a larger global surplus of sulfur expected, Harrisson said. However, things could turn tighter again in 2019 as surplus supply lessen, he said.

The sulfur market is "incredibly volatile," Harrisson said.

Russ Quinn can be reached at russ.quinn@dtn.com

Follow Russ Quinn on Twitter @RussQuinnDTN

(ES/CZ )

Copyright 2017 DTN/The Progressive Farmer. All rights reserved.