INSIGHT: Canada sulphur inventories scrape bottom despite low demand in peak season

Source: ICIS News

2018/08/10

HOUSTON (ICIS)--Despite sulphur inventories scraping bottom in Vancouver,  suppliers in Canada are widely comfortable due to low demand from China during India’s peak phosphates season.

- Syncrude outage in Western Canada further strains supply

- Low China demand puts Vancouver suppliers on the sidelines

- Canada export prices capped for most of the summer

Between a turnaround at Shell’s Shantz forming facility, lower output at Suncor and halted production at Syncrude, extremely low Vancouver supply has also contributed to a lack of sales done.

The lack of China buyers leaves Western Canada suppliers able to wait out the Syncrude outage and slowly build back up their inventories.

During this time, export prices from the country have been more or less capped.

PRODUCTION ISSUES, MAINTENANCES, RAMP-UPS
The quarter, and year overall, have been rife with shifting production and processing of sulphur in Canada that has led to lower production year to date compared to the same period in 2017.

Suncor's Syncrude oil sands and sulphur facility will remain offline or at reduced rates until September due to an unplanned outage caused by a lightning strike, according to sources, occurred on 20 June.

Some units were slated to come back online in the second half of July, and a second round is expected to start up in the first half of August.

Maintenance on coker units that was originally scheduled for the next nine months was brought forward as well, which will keep pipeline shipments reduced to 60-70% during August.

Suncor expects full Syncrude production to return in September.

With this as a major source of lost tonnes on top of what was already-constrained inventories, most suppliers are sold out of spot tonnes until September and few loadings are slated between now and then.

Adding to the production puzzle this year is the Edmonton Heartland Project, which has added about 700,000 tonnes/year of prilling capacity to the market and loaded its first railcars during the second quarter.

The project is fully subscribed for the first year and the operators begun to consider an expansion before the initial capacity was completed.

This could affect Nutrien’s Redwater phosphates plant, which uses sulphur as a feedstock.

Before the priller was operational, producers in the region had limited choices on what to do with their molten sulphur, and much of it went to the Redwater plant by rail.

Earlier this year, Nutrien addressed market talk that it might be eyeing a closure at its Redwater facility, arguing it will be considering options at year-end once it ceases the phosphate rock supply from OCP.

The facility could switch to ammonium sulphate production, which would decrease sulphur consumption to 200,000-250,000 tonnes.

Port turnarounds have taken place mid-year as well, with Kinder Morgan finishing its turnaround in the Port of Vancouver while Pacific Coast Terminals will have a turnaround in the second half of August.

These turnarounds typically do not affect sulphur exports out of the port, since operations from the facility in turnaround can shift to the other facility.

With this turnaround especially there was no great effect since China being on the sidelines has put loadings in the port few and far between.

LOW DEMAND, PUZZLED MARKET
In China, high inventory levels have muted demand over the summer months.

Downstream India phosphates buyers finally returned to the market despite the depreciation of the rupee because of low stocks and phosphoric acid cost increases.

With the monsoon season heavier than expected in some states, it is now a waiting game between how quickly China sulphur buyers burns through existing inventory and how long India phosphate demand lasts.

China-formed sulphur inventories are at their highest level since at least October 2016.

Weak China consumption has served to cap global price increases throughout the second quarter and beginning of the third, and counterbalanced tight global supply.

Pictured: Piles of sulphur in the port of Vancouver
Source: Design Pics Inc/REX/Shutterstock

By Annalise Little

Additional reporting by Mark Victory