Q3 collapse: China phosphate curbs and 80 percent Vancouver drop

From July into August 2022 the sulfur market reversed violently. Chinese authorities implemented a de-facto export quota regime in July for phosphate fertilizers in the second half. DAP operating rates fell to 40 to 50 percent at river ports and about 50 percent in Yunnan and Guizhou by end-July, Argus reported, triggering a global sulfur price collapse. Keg River, citing Fertecon weekly Vancouver spots, reported roughly an 80 percent decline over about five weeks. Argus described Vancouver falling from a midpoint near $478 per tonne FOB, highest since 2008, to under $65 per tonne FOB within about two months as phosphate interest faded. BC Insight and CRU reported Middle East FOB averages dropping from about $485 per tonne in June toward about $71 by early August. Three public anchors, one crash.

Muntajat set the August Qatar Sulphur Price at $77 per tonne FOB, down $351 from July's $428. Argus granular CFR China slumped to $95 per tonne on 4 August as Chinese buyers pulled back from imports and turned to domestic sulfur. IndexBox put September import price at $129 per tonne CIF, down 62.5 percent month on month, volumes 544,000 tonnes, down 13.2 percent, after June's peak near $471 CIF and 948,000 tonnes. Top September suppliers included South Korea 90,000 tonnes, Iran 88,000 tonnes, and Canada 71,000 tonnes. USGS recorded Tampa at $352 per long ton by mid-July after the early-April $481 peak. Molten contracts lag seaborne spots. Fourth-quarter Tampa would print $90. Mid-July $352 is the hinge, not the floor.

Alberta recovered sulfur still leaves mainly through the Vancouver stem. $478 FOB paid remelt, rail, forming, and terminal with room to spare. Under $65 does not clear a chain often cited above $150 per tonne. Third-quarter 2022 is when pour-to-block returns as the default for remote Alberta tonnes. Current recovery still loaded. Argus citing the port showed January-October exports of 2.39 million tonnes, already above full-year 2021's 2.29 million. The remaining months would complete 2.79 million tonnes, up 22 percent. Volume programmed in the first half loaded through the collapse. Annual tonnes and August FOB are different series. South Cheecham was still construction. Heartland forming handled the spike tonnes. Remelt tickets paused on the crash tonnes.

China January-October sulfur imports totaled 6.65 million tonnes, down 22 percent year on year, Argus. April-June had been 2.4 million tonnes, up 50 percent. July-October slowed to 2.5 million tonnes, down 5.9 percent. The first-half surge and second-half fade defined 2022 Chinese sulfur trade. Huaxicun had halted on 16 June, removing a domestic paper venue just as physical policy intensified. Buyers leaned on domestic recovered sulfur. Import demand stayed selective. IndexBox later put 2022 import value near $2.3 billion, then 2023 volume up 16 percent to 8.8 million tonnes at about $1.1 billion. Third-quarter 2022 is the value year breaking.

Elevated US Gulf refining from resilient fuel demand added recovered tonnes even as Mosaic reported sinking utilization and inventories swelled in early third quarter. Argus linked that mismatch to the crash's amplification. USGS January-August US production was higher year on year as fuel demand recovered. World output about 82 million tonnes, roughly unchanged, meant the crash was demand, not a Claus collapse. UAE about 6.0 million tonnes production kept Gulf solids in the seaborne list, now at $77 QSP. Floating storage and unsold vessels near China featured in open commentary as the proximate trigger. UNCERTAIN: how much of the August floor was true demand destruction versus temporary destocking by traders.

The Fertilizer Institute's plus 198 percent sulfur cost March 2021 to March 2022 is why phosphate utilization sank. Affordability, not molecule shortage, cut the bid. Recovered output kept coming. That is the mismatch. Russia's February invasion had hampered supplies in USGS's telling and lifted first-half premia. It did not cause the July quota. Third-quarter 2022 is the third shock of the twelve-month stack: October 2021 inspections, February war, July quota. Sulfur priced all three, then crashed when the third destroyed demand.

Alberta recovered sulfur still leaves mainly through the Vancouver stem. World surplus, once it starts, shows up there as FOB that no longer covers inland costs and a harbour that still finishes a 22 percent year because the first half was already committed. Canadian exporters that had programmed second-half stems faced a different commercial problem than the second quarter: how to place tonnes when FOB no longer covered inland costs. Some answer was continued loadings already fixed. Some answer was pour-to-block inland. Licensed weekly assessment grids are not restated here. The $478-to-under-$65 Vancouver path is Argus open news. The 80 percent five-week drop is Keg River citing Fertecon. The $352 and $481 Tampa figures are USGS.

The episode is why later affordability warnings in phosphate and metals chains deserve equal weight with supply headlines. 2023's $55 Tampa trough and $72 Vancouver December midpoint are the surplus regime this crash created. 2025's remelt draw is when FOB would pay again. IFA's later 2023 MAP and DAP still below 2020 starts from this cut. Nickel HPAL's 3.5 million tonne 2023 sulfur use was not yet large enough in September 2022 to offset phosphate destruction. Battery metals were a 2023-25 floor, not a 2022 rescue. A desk that only watches Tampa $352 will miss that seaborne spots had already gone to $77 QSP and under $65 Vancouver FOB. A desk that only watches those spots will miss that the harbour was still heading for 2.79 million tonnes. Third-quarter 2022 requires both reads. Demand died. Logistics did not.

Key points

• Keg River / Fertecon: ~80% Vancouver spot drop mid-July to mid-August 2022.
• Argus: Vancouver from ~$478/t peak toward under $65/t FOB within ~two months.
• BC Insight: ME FOB ~$485/t June to ~$71/t early August 2022.
• China phosphate export restrictions and affordability cut sulfur offtake.
• UNCERTAIN: share of crash from China floating storage liquidation vs fertilizer margin collapse.

30-day watchlist

• USGS fourth-quarter Tampa path off the $352/lt mid-July hinge toward the later $90/lt close.
• October Chinese import tonnes versus July-October's 2.5 Mt, down 5.9%.
• Vancouver monthly loadings into the $65 FOB world versus the 2.39 Mt January-October run-rate.
• Any Mosaic or Gulf inventory commentary as US length meets the seaborne crash.

Sources

• Sulphur Market Falls Back to Earth (Keg River)
• Price Trends (BC Insight / CRU, Sep 2022)
• Viewpoint: Sulfur volatility to wane as supply recovers (Argus)
• Viewpoint: Increasing supplies pressure Chinese sulphur (Argus)
• USGS Mineral Commodity Summaries 2023 - Sulfur

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Public reference summary. Weekly PRA assessments require a commercial license. Not investment advice.