The Long Term Outlook For Frasch Sulphur in International Trade

INTRODUCTION The global market for sulphur has experienced dramatic structural shifts during the past 10-15 years. After a number of years of dominance as sulphur suppliers, the world's Frasch producers were confronted with large increases in nondiscretionary sulphur production from sour crude oil and gas, while escalating energy and exploration costs reduced the economic incentives to replace dwindling sulphur reserves. Sulphur demand also experienced substantial growth, but the majority of this increase was filled by nondiscretionary production. The result was essentially flat demand for Frasch sulphur during this period. This paper briefly summarizes Freeport Sulphur Company's outlook for global supply and demand for sulphur through the year 2000, and examines in more detail the history and anticipated shifts in trade patterns. World trade in elemental sulphur (brimstone), despite year-to-year fluctuations, has been on an upward trend in recent years, and should continue to grow through the end of this century. The type (discretionary vs. nondiscretionary) and location of forecast sulphur supply sources has potentially broad implications for the world's Frasch producers, as they compete in a world market which is increasingly supplied by non-discretionary production. SULPHUR DEMAND Sulphur is a versatile and essential element used in a wide variety of manufacturing processes. Almost 90% of world sulphur consumption is in the form of sulphuric acid. The relatively low cost, ready availability, and physical and chemical properties of sulphuric acid make it the most economical acid for a number of chemical processes. Although sulphur is used in the manufacture of many products, the largest consumer by far is the phosphate fertilizer industry. The majority of sulphur demand growth over the past 30 years has occurred in this area, and today it accounts for nearly 65% of global sulphur consumption in all forms. Due to the relative importance of phosphate fertilizers, sulphur demand is typically discussed in terms of fertilizer and non-fertilizer (or industrial) uses, and this approach will be followed here. We at Freeport believe that global consumption of phosphate fertilizers should grow at an average annual rate of about 3.5% through the year 2000, which is roughly equal to the growth rate experienced during the past ten years. The basic assumption underlying this forecast is that world population will continue to grow significantly, while the total acres of cropland will grow only slightly. Therefore, in order to feed a growing population, higher crop yields will be necessary, which in turn will require the increasing use of fertilizers. This expected growth in phosphate consumption will, without doubt, fluctuate from year to year, and we Frasch producers have painful memories of the large dip in demand during 1982-83. However, we believe that the fundamentals for growth are very good, and that future demand will move back onto the historical trend line. In the recent recession the use of sulphur in the non-fertilizer or industrial sector dropped sharply, and it now appears that future growth will not return to the old trend line. Most of the non-fertilizer uses of sulphur and sulphuric acid involve older industries which are very mature, such as oil refining, steel, pulp and paper, pigments, etc. The use of sulphur in some of these industries is expected to exhibit little or possibly even negative