Global sulphur production has been steadily increasing since
2009 to an estimated 70m tonnes in 2012 according to figures
from the US Geological Survey (USGS), and a substantial amount
of additional sulphur capacity has been planned over the course
of the next two years.
Rather than growing as a response
to demand, however, supply has been rising in line with
increased activity in the production of oil and gas. Bearing in
mind the recent dip in sulphur demand due to a drop in
phosphate rock consumption, this steady growth may lead the
industry into a sulphur oversupply in the near future, unless
demand for the mineral can keep up.
SUPPLY SECURITY
Sulphur is a naturally-occurring mineral and is the
13th most abundant element in the earth’s
crust. It can be mined in its elemental form using the Frasch
process as a method of extraction from underground
deposits.
However, more common since the late
20th century is the production of elemental sulphur
as a by-product of the oil and gas industry, as sulphur needs
to be removed prior to refining or marketing, resulting in a
higher quality and higher priced end product. Oil refiners need
to comply with regulation regarding the level of sulphur in the
end product, and the production and storage of sulphur waste
must adhere to strict regulations, as the discharge of sulphur
compounds into the atmosphere is severely restricted.
Sulphur can also be produced as a
by-product of metal smelting, in sulphuric acid form, or it can
be released as sulphur dioxide.
2012 world sulphur production is
estimated at 70m tonnes by the USGS, a slight decrease from
70.5m in 2011, although on the whole production has been
increasing at a steady pace for the last few years.
The latest figures from the USGS
show that China leads production with 9.7m tonnes produced in
2012. This total was contributed to by 66 producers. Sinopec is
the largest Chinese producer, followed by CNPC and other local
refiners. Consumption of sulphur in China is expected to grow,
however import requirements are declining and will continue to
do so as China’s own sulphur capacity increases.
The second largest sulphur producer
in 2012 was the US with a total of 9.05m tonnes, followed by
Russia (7.3m tonnes); Canada (6.6m tonnes); Saudi Arabia (4.6m
tonnes); Germany (3.7m tonnes) and Japan (3.2m tonnes).
US production
Total US shipments of sulphur and
by-product sulphuric acid were valued at around $1.3bn.
Production took place at 109 operations in the US.
Elemental sulphur production
accounted for 87% of all sulphur produced at 8.4m tonnes, with
the states of Louisiana and Texas accounting for 53% of
domestic production. Recovery came from petroleum refineries
(accounting for the highest tonnages), natural-gas processing
plants and coking plants from 39 companies, according to USGS
data. 59% of elemental sulphur produced was consumed
domestically.
By-product sulphuric acid
represented 7% of all sulphur produced with recovery from seven
non-ferrous smelters from five companies. This accounted for 5%
of domestic consumption.
The remaining 36% of sulphur
consumed in the US was imported mainly from Canada, Mexico,
Venezuela and India.
Additional capacity 2013-2014
The USGS anticipates that global
sulphur production will continue to steadily increase provided
another downturn in the economy does not limit investment in
expected new operations.
According to figures from the
International Fertilizer Industry Association (IFA),
significant additional sulphur capacity is planned as a
consequence of liquefied natural gas operations in the Middle
East, and oil sands operations in Canada. 2013 and 2014
additional capacity is expected to come online from the
following projects:
PetroChina/Chevron
Chevron operates the
1,969km2 natural gas area at Chuandongbei in the
onshore Shichaun Basin.
The company has invested $6.4bn in
a major development project in which it has a 49% stake. Two
sour-gas processing plants with a 740m cubic feet per day
capacity will enable the company to produce gas that meets
customer specifications, natural gas liquids and elemental
sulphur.
The project development will bring
the company’s sulphur recovery capacity to 1.5m tpa. The
first natural gas processing plant is expected to be
mechanically complete by the end of 2013 and site preparation
for the second plant began in 2012. The company plans to begin
an exploration well in the area in Q3 2013.
Turkmengaz
The national gas company of
Turkmenistan, Turkmengaz, is planning additional capacity at
the South Yoloten gas field. The development will bring the
company’s sulphur recovery capacity up to 750,000 tpa.
The $3.4bn contract for the
engineering, procurement, construction and commissioning of the
project was awarded to Petrofac. The project includes the
building of a 10bn cubic metre per year (bcma) gas processing
plant, infrastructure and pipelines for the 20 bcma
development.
The South Yoloten field is the
second largest globally, with over 700 tcf gas reserves, and is
located 400km south east of Turkmenistan’s capital
Ashgabat.
BP
The company is investing billions of dollars into the
modernisation of its Whiting Refinery in Northwest Indiana,
US.
The reconfiguration of its largest
crude distillation unit will enable BP to process heavier
crude, taking its processing capability from 20% today to 85%
heavy crude by the end of this year, with the goal of becoming
the premier refinery in North America.
Expectations are that the
modernised refinery will come on-stream in the second half of
2013, and will bring BP’s sulphur recovery to a total of
480,000 tpa.
Indian Oil
With a current production capacity of 246,600 tpa, IndianOil
has a number of oil projects planned in Paradip, India, which
will bring the company’s sulphur recovery capacity to
335,000 tpa in 2013.
Gasco
The Abu Dhabi Gas Industries
(GASCO) gas development projects plans to add additional
onshore and offshore gas processing capacity at Habshan and
Ruwais in Abu Dhabi.
Currently the Habshan gas complex
produces approximately 4,500 tpd liquid sulphur as a by-product
of acid gas processing, which is then delivered to GASCO Ruwais
facilities for granulation and export. A new complex called
Habshan 5 will be comprised of a gas processing facility, a
natural gas liquids recovery unit, four sulphur recovery units
and utilities, and offsite facilities.
The development will bring the
company’s sulphur recovery capacity up to 3m tpa, expected
in 2014. Transportaion of liquid sulphur from the Habshan
plants will take place through electrically heated pipelines,
storage of liquid sulphur, granulation, storage of granulated
sulphur, and then by loading onto rail wagons. The project is
under EPC phase of implementation.
ADNOC
The company is expanding its
operations at the Shah sour gas field, located 230km south of
Abu Dhabi and 70km south west of the Asab field. The project,
with an estimated Capex of $10bn, includes the development of
high-sulphur content reservoirs within the Shah field.
Construction will involve several gas gathering systems, new
gas and liquid pipelines, and processing trains.
Full field development of the
project is expected to be completed and first field production
scheduled to begin by 2014. The expansion will bring the
company’s sulphur capacity to 3m tpa.
Saudi Aramco
The Manifa crude oil development,
which began first phase operations three months ahead of
schedule in April 2013, was designed to ultimately produce
900,000 bdp Arabian heavy crude oil, 90m scfd sour gas, and
65,000 bdp hydrocarbon condensate.
The $17bn project - which when
finished will consist of 41km of causeways, 3km of bridges, 27
drilling islands, 13 offshore platforms, 15 onshore drill
sites, water supply wells, injection facilities, multiple
pipelines and a 420-megawatt heat and electricity plant - will
bring the company’s total sulphur recovery capacity to
450,000 tpa.
MARKET DEMAND
General manager for Transfert FZCO,
Robert Whelan, told IM that there is little
surprise that the Middle East is primarily driving additional
quantities considering the increased activity in oil and gas
production.
“The general consensus is that
supply is growing faster than demand as Abu Dhabi alone will
increase its production in excess of 8m plus tonnes alone.
Qatar will increase to 4m plus tonnes. Kuwait to 1.5m
tonnes,” he said.
He added that: “KSA will also
increase but will use much of the increased production to
manufacture diammonium phosphate (DAP) for
export.ÊTherefore the increased DAP for export will have
a negative effect on sulphur demand as a feedstock in more
traditional outlets.”
Although sulphur supply may be
currently increasing due to other avenues apart from demand for
its end uses, it still remains inextricably linked to the
fertiliser market. Figures from the IFA indicate that 46% of
sulphur demand comes from fertilisers, 40% of which are
phosphoric acid-based fertilisers, with the remaining 6%
accounting for other sulphur-based fertilisers. 45% of sulphur
demand is driven by industrial sulphuric acid uses, and 9% of
demand comes from other industries.
Fertiliser
demand
Sulphur is primarily utilised in
the production of sulphuric acid (H2SO4)
the main use of which is phosphoric acid production. This is
then in turn used for the manufacture of phosphate fertilisers
and non-fertiliser phosphates, meaning that demand for sulphur
is very closely linked to phosphate rock consumption.
Speaking to IM
about the recent drop in phosphate rock consumption, Whelan
said: “It has had a significant effect mainly due to the
situation in India where last year many other non-DAP
fertilisers were imported (NPK, NPs) in large volume as they
were selling at a significant discount to DAP and could be
purchased year round from China.”
Whelan added that in addition to
the lower demand from India, the wet season was heavily delayed
last year causing stocks not to be used.
“We will have to see after
this season, as the rains have been plentiful, as to the net
effect.Ê It is too early to tell if the DAP market
fundamentals have changed or not,” he said.
One Chinese source confirmed to
IM that: “Currently, as the phosphate
fertiliser is excessive, the sulphur market is also fatigued
and weak.”
The general feeling from producers
is that with population growth, a rebound in fertiliser demand
is inevitable. According to The Sulphur Institute (TSI), the
rate of global population and calorie consumption growth will
cause food demand to double by 2050, meaning an increase in
fertiliser application will be needed to achieve food
security.
“Meeting the expected demand
for food requires strategies to slow the loss of farmland and
create an environment where marginal soils can be more
productive,” TSI said at the April 2013 Sulphur World
Symposium in Beijing.
Increased urbanisation,
industrialisation and the need for food production is
intensifying pressure on the earth’s arable land mass.
“As the world’s
population continues to soar there could be another 2.5bn
people in the next 40 years, and more than 60% of the
world’s population will be living in big cities within the
next 15 years,” TSI said.
According to research from TSI,
although government and non-governmental organisations have
advocated the application of nitrogen (N), phosphorus (P) and
potassium (K) based fertilisers, sulphur, which has become less
abundant in soils, is also recognised for its importance to
plant growth through balanced fertilisation.
Crop nutrients, including
sulphur-based fertilisers, will need to be added to increase
yields and improve crop quality, but sulphur application as a
fertiliser is an immediate way to enhance food production and
its protein content, TSI explained.
“Sulphur must now be
deliberately applied to meet the growing demand for plant
nutrition and to improve crop quality,” it added.
Whelan added that increasing
populations in developing countries will be key to fertiliser
demand.
“Our opinion is over time
demand for all fertilisers will increase substantially as areas
such as South East Asia, Indian Sub-Continent, Africa and Latin
America are well ‘under-nourished’ compared to what
is applied in North America and Europe per hector,” he
said.
“The differential is enormous
and over time these developing areas will catch up. How long
this will take is in question,” Whelan added.
China’s sulphur deficiency
As the world’s most populated
country, holding 1.3bn people or (19% of the world’s
population), but with only 9% of the world’s arable land,
China has to overcome the additional problem of soil nutrient
deficiency, with over 44% of soils deficient in sulphur.
“The China situation is that
the population is huge and grain production and fertiliser use
is also huge, but the arable land is small. That is a serious
challenge,” Donald Messick, vice president of agricultural
programmes for TSI, told the Sulphur World Symposium in
April.
According to data from TSI, 10.6m
hectares (106km2) of land were found to be sulphur
deficient. Further research was conducted by the organisation
to determine the economics and value to cost ratio of applying
sulphur as a fertiliser to nutrient deficient soils.
“We worked in 18 provinces on
field trades and province testing. Our studies and trials
showed an economic return of around $20-$25 return/dollar
invested,” he added.
To educate the agricultural
industry and enable farmers to gain a better understanding of
where sulphur was needed, in 2008, TSI and the Chinese Ministry
of Agriculture conducted a nationwide project examining sulphur
as a component of the government’s Soil Testing and
Fertiliser Recommendation programme.
A delegate attending the Sulphur
World Symposium told IM: “I don’t
think the function of sulphur to the plants/crops is recognised
completely, especially some by peasants in China.”
“It is analysed that in most
provinces of China, soil is seriously lacking in sulphur. Now
the government has promised to take precedence to advocate the
function of sulphur, thus an increase in sulphur-based
fertiliser application is undoubted,” the source, who did
not want to be named, added.
Increasing Chinese
consumption
To improve fertiliser efficiency,
another issue in China, TSI also examined the application of
sulphur together with nitrogen and phosphorous, as well as the
potential this type of application has to increase yields.
Although single super phosphate
(SSP) fertilisers dominate the Chinese market, recent increased
awareness of sulphur-based fertilisers is driving growth in
this area.
“It’s a diverse system.
You have many different sulphate fertilisers, but a lot are new
and are just coming in to recognition. So the market share of
sulphur fertilisers definitely has the potential to grow in the
future,” Messick said.
“SSP dominates the industry
but we’ve seen more diammonium phosphate (DAP),
monoammonium phosphate (MAP), and we can expect to see a
continued decline in SSP as sulphur use increases. Fertilisers
containing other nutrients are also increasing, and things are
getting more and more complex as you move into the sulphur
business,” he added.
Sulphur production in China began
in the late 1990s and early 2000s, and the use of sulphur to
make compounds began to climb as awareness of the mineral grew,
with China importing around 10-12m tonnes in recent years.
“In the market right now there
is a need for another 2m tpa, and there is potential for this
to grow to an additional 6m tpa,” Messick said.
“We’re only going to see this market grow in the
future.”
He added that increasing the use of
sulphur fertilisers not only benefits the manufacturers, but
benefits farmers, the agricultural community, human health and
nutrition and the environment.
Whelan agrees that China will be
the driving force behind demand considering in 2012 it imported
in excess of 11m tonnes sulphur, and Chinese customs data shows
that these figures have been increasing at least for the first
part of 2013 (see figure 4). Although imports
experienced a slight dip in 2011, data shows 2012 imports at
11.2m tonnes, while imports for January and February in 2013
were already higher than 2012 levels.
The regulation
question
The successful growth of
China’s sulphur industry partly depends on the route it
chooses to take regarding regulation. Messick drew attention to
the two very different methods of regulating fertiliser imports
into the US and India, questioning which route China might take
to regulate its own fertiliser industry.
“The regulatory environment
needs to be dealt with. China has used fertilisers in the past
which haven’t worked so they are choosing to
regulate,” he said.
Regulation of fertilisers in India
is extremely complex, Messick explained, while in the US the
responsibility lies with the manufacturer to provide what has
been agreed and ensure specifications are met.
“What will China do? We hope
they will follow the example where the manufacturer is
responsible, however they are looking at what other countries,
such as India, are doing in terms of regulation,” he
said.
“This is our last obstacle, to
try and ensure the Chinese government (...) stays sensible to
allow the industry to grow,” he added.
The fertiliser industry in China
has come under increasing scrutiny because of doubts
surrounding the effectiveness of fertiliser application.
This is due to a lack of balanced
fertilisation and a heavy reliance on crop nutrition from
nitrates which cannot be properly absorbed if there is not
enough sulphur present in the soil.
“The nutrient deficiency has
been caused by more food being grown and more fertiliser
application, so nutrients are being increasingly taken out of
the soil and not being replaced in the way they should be
because there hasn’t been balanced fertilisation,”
Messick explained.
The importance of metal
leaching
The use of sulphuric acid in ore
leaching is a growing industrial use for sulphur, used mainly
in copper and nickel acid leaching, but also for uranium and
zinc.
High pressure acid leach (HPAL) is
the main method of nickel leaching, and a number of nickel
leaching projects are expected to drive demand in this
area.
These projects include the
Ravensthorpe nickel operation in Australia, which needs 500,000
tpa sulphur at full capacity; The Ramu project in Papa New
Guinea, which will require 350,000 tpa; the Goro nickel project
in New Caledonia, which will need 460,000 tpa at full capacity;
and the Ambatovy nickel proeject in Madagascar, which at full
capacity will utilise 600,000 tpa sulphur.
PRICE TRENDS
According to data from the USGS,
contract prices in Tampa, FL, began 2013 at around $220/tonne,
decreasing to $170/tonne in May 2012. Although prices remained
relatively stable throughout much of the year, in October the
price dropped further to $160/tonne, with export prices at
similar values.
The current spot price for sulphur
(Canadian solid, spot, FOB Vancouver) is reported at
$135-$160/tonne according to the IM database,
(pp 57-59), while
sulphur (FOB Middle East) stands around $145-$155/tonne.
“The market has been under
tremendous pressure for the past two months. FOBs have been cut
in half the 2nd quarter to levels well below
$100/tonne,” Whelan told IM.
“Cargo from Canada is now
reaching China at less than $95/tonne CFR and same from Middle
East. One report was $85/tonne CFR from Vancouver, which would
give an FOB net back of $65/tonne,” he said.
Another source indicated to
IM that the database prices listed are similar
to those on the Chinese market, and recent price decreases mean
that in some Chinese provinces sulphur is being sold at RMB
900/tonne ($146/tonne*).
“There isn’t any sign to
show that the price will increase, perhaps it will keep several
months,” the source said.
Whelan added that although it
difficult to predict whether prices will continue to fall over
the course of 2013 due to the variety of factors affecting the
price, “we feel one should be cautious about further
significant market erosion”.
MARKET
OUTLOOK
Despite the growth in fertiliser
demand, figures from the IFA indicate that a sulphur oversupply
is on the cards at least in the near future, as shown in
Figure 3, and that until 2016 at least, production of
sulphur from the oil and gas industry will outstrip demand.
Asked if we are already
experiencing a sulphur oversupply, Whelan says that current
producers disagree, while end users say that yes, we are
already experiencing one. He is however more positive about the
future, and hopeful that the demand from fertilisers will help
create some balance.
“We are cautiously optimistic
about the fertiliser market as a whole which should help
sulphur recover somewhat,” he told
IM.
As to whether an oversupply looms
over the future of sulphur, this remains to be seen.
“As of now, we do not see
where all the new Middle East production will land up. But it
is too early to predict beyond 2014, which seems fairly
balanced,” Whelan says.
*Conversions made July 2013
Sulphur uses
Other uses of sulphur include caprolactam, pigments,
hydrofluoric acid, pulp and paper chemicals, sulphur
fertilisers, petroleum refining, batteries, detergents,
fungicides, carbon disulphide, pharmaceuticals, personal care
products, cosmetics, leather tanning, rubber vulcanisation,
plasticisers, dyestuffs, explosives, aramid fibers,
construction materials, sugar manufacture, dehydrating agent in
organic chemical and petrochemical processes, water treatment,
and steel pickling.