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Combating Uncertainty in the US Sulphur Market

Espresso-live Speakers
by Prasoona Nalla
18 July 2012

US is moving into an era of adoption of unconventional resources. Tar sands and the Shale Gale have been buzz words in the sulphur industry lately. Shale gas has no recoverable sulphur unlike the sour gas from the natural gas fields in Western Canada and USA. On the other hand, tar sands are considered to be rich sources of sulphur in the coming years. So what is going to offset what? With the increasing adoption of shale gas reserves as opposed to the sour gas owing to higher availability and lower processing costs involved related to sulphur recovery, some consumers expect a deficit in the sulphur market in the coming years. However, other experts are of the opinion that the sulphur from the tar sands from Canada and US is expected to more than offset the deficit created by the so-called Shale Gale. So what is it finally going to be? Glut or deficit? Price hikes or declines? Owing to the uncertainties with respect to sharp changes in the forecasts of the shale reserves by the EIA, the environmental restrictions to fracking, etc. the answers to the above questions have had to bank on speculations. While the shale gas boom deems pessimistic influence to the sulphur supply market, the tar sands assures increased supply into the sulphur market. . Thus, the upcoming structure of the sulphur supply market lacks clarity. A by-product industry is characterized by uncertainties, the root cause of which is its dependence on the core industry and market. This implies that the by-productï¾Ãƒâ€šÃ‚Æ’??s supply in the market is inelastic with respect to its price. Thus, no matter how much the by-product prices might not hike, the supply would not ramp up unless the core industry and the core product start picking up. Sulphur is one such commodity. It is probably one of the most valued by-products considering its wide array of end-use applications. In the case of sulphur, the key core industries are the oil refining and natural gas processing industries which in turn, form the core of the energy industry. The demand for sulphur remains perennial all through the year. This is because about 90% of its supply goes into sulphuric acid manufacturing which in turns finds its demand in industries as fertilizers, chemicals, oil refining, base metal ore smelting, etc. These end-use industries have a steady demand all through the year. However, refinery cutbacks are bound to bring about a shortage in the sulphur supply thereby pushing the prices high by large margins.

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