Sulphur & Sulphuric Acid

Sulphur is the clearest example in this book of an involuntary commodity. More than 90 percent of world supply is recovered, meaning it is stripped out of sour crude oil in refineries and out of sour natural gas in processing plants, because sulphur compounds poison catalysts, corrode equipment, and produce sulphur dioxide when burned. Environmental rules require the removal, so the sulphur comes out whether or not anyone wants it. Refinery output alone ran over 70 million tonnes in 2023. The consequence is the defining feature of this market: sulphur has almost no supply curve. Production is set by how much sour crude and gas the world processes and by how strict the emissions rules are, and it does not respond to the sulphur price at all.

What it becomes is sulphuric acid, and by tonnage that is the most-produced chemical in the world, the one traditionally used as a rough index of a country's industrial output. The chemistry is simple: burn sulphur to sulphur dioxide, oxidise it to trioxide, absorb it in water. The acid is then a workhorse in a dozen industries, but one use dominates everything else.

That use is phosphate fertilizer, which is why this sheet sits in the fertilizer group rather than with the refined products it comes from. Phosphate rock is useless to a plant as mined. To make it available it has to be digested in sulphuric acid to produce phosphoric acid, which is then ammoniated into DAP and MAP. There is no commercial route around it at scale. So a refinery removing sulphur to meet a fuel specification is, several steps later, the reason a phosphate mine can sell fertilizer, and the sulphur price is a real input cost buried inside the phosphate price on the neighbouring sheet.

The second growth market ties this sheet to the battery complex. Sulphuric acid is the leaching agent for a range of metals: it is used in copper heap leaching and, more importantly for the current decade, in the high-pressure acid leach route that turns lateritic ore into the nickel and cobalt chemicals that go into batteries. Every expansion of Indonesian nickel processing is also, quietly, an expansion of sulphuric acid demand. The rest goes into industrial chemicals, metal pickling, detergents, and lead-acid batteries.

Because supply is fixed and demand is concentrated, the price behaves violently. Sulphur has moved from negative territory, where producers effectively paid to have it taken away, to spikes of several hundred dollars a tonne when phosphate demand ran hot, and back. A regulatory change can move supply directly with no reference to demand: the IMO 2020 marine fuel sulphur cap, which forced refiners to strip far more sulphur out of bunker fuel, was estimated to add on the order of four million tonnes a year, around six percent of world supply, from a rule written about air quality at sea rather than about the sulphur market at all.

There is no futures contract anywhere for sulphur or sulphuric acid. Prices are assessed by reporting agencies on an FOB basis at the main export points, above all the Middle East and Vancouver, and negotiated quarterly or on contract between producers and phosphate makers. The market's structure explains the absence: a byproduct with inelastic supply, a handful of large buyers, high freight cost relative to value, and regional prices that can diverge enormously because moving molten sulphur is expensive. It is a market that exists because of a regulation, priced by assessment, and almost invisible outside the industries that depend on it.