Sulfur Demand: Increased Capital Expenditure in Phosphorus Fertilizers and Lithium Iron Phosphate Boosts Demand

The downstream consumption of sulfuric acid is mainly for monoammonium phosphate and diammonium phosphate.

The downstream consumption of sulfuric acid is mainly in areas such as monoammonium phosphate, diammonium phosphate, and sulfuric acid titanium dioxide, with sulfuric acid consumption for fertilizer reaching 48% of the total.

Since 2017, the domestic production and apparent consumption of sulfuric acid have remained relatively stable, with relatively low import and export volumes. In 2022, the price of sulfuric acid skyrocketed, leading to suppressed domestic consumption. However, due to the concentrated downstream demand in the phosphate fertilizer sector, which is relatively inelastic, the decline in consumption was relatively modest. As of February 2022, the apparent consumption of sulfuric acid in China was 14.59 million tons, a decrease of 2.21% year-on-year.

Sulfuric Acid Prices Soar Rapidly

With the rapid increase in sulfur prices, sulfuric acid prices are also on the rise. As of April 14, 2022, sulfuric acid prices are approximately 1,080 yuan per ton, and smelting acid prices are approximately 950 yuan per ton.

Global capacity and demand for phosphate fertilizers are both steadily increasing.

According to IFA forecasts, global phosphoric acid production capacity is expected to increase by 1.4 million tons (pure P2O5) in 2022, reaching a total of 60.9 million tons. From 2021 to 2025, an additional 3.6 million tons of phosphoric acid capacity will be added globally, with the projected capacity reaching 62.9 million tons by 2025. Most of the capacity expansion is coming from Africa and the EU, with China expected to add 1.3 million tons and shut down 510,000 tons of capacity.

In 2021, the rapid increase in the prices of urea, monoammonium phosphate, diammonium phosphate, and other products suppressed agricultural demand. The global demand for phosphate fertilizers is expected to be 48.0 million tons, down 3.3% year-on-year. With the rise in food prices, farmers' willingness to accept higher fertilizer costs has increased, and it is predicted that the global demand for phosphate fertilizers will reach 49.5% this year, a 3.1% year-on-year increase. In the medium to long term, as food demand rises and countries place greater emphasis on national food security, the global demand for fertilizers is expected to grow slowly at an annual rate of about 1.4%, with phosphate fertilizers increasing by 1.8% annually.

Domestic hot phosphoric acid production capacity has been declining year by year.

July 3, 2019, the China Central Television's "Focus Interview" exposed issues of phosphorus pollution. Subsequently, some local enterprises suspended operations for rectification, leading to a significant drop in the开工 rate of phosphorus yellow in the Yunnan-Guizhou region, with many companies halting production for整顿. As medium and small-scale, and outdated production capacities are gradually phased out, the difficulty in adding new capacities arises, resulting in a gradual reduction of domestic phosphorus yellow production capacity. Due to the rise of wet-process phosphoric acid, coupled with the gradual elimination of phosphorus yellow capacities, the production and output of thermal-process phosphoric acid are showing a downward trend.

Domestic wet-process phosphoric acid expansion efforts accelerate

Wet-process phosphoric acid is approximately 25% cheaper than hot-process phosphoric acid, with the added benefits of lower energy consumption and reduced pollution. However, it has the drawback of higher impurities and lower quality compared to hot-process phosphoric acid. To enhance the quality and value-added of wet-process phosphoric acid, purification is essential. The solvent extraction method is predominantly used for industrial purification of wet-process phosphoric acid worldwide, supplemented by chemical precipitation and crystallization methods to produce different grades of purified phosphoric acid. The industrial production of wet-process phosphoric acid for preparing industrial phosphoric acid has become a mainstream trend abroad, with the market share of hot-process phosphoric acid continuously declining. Currently, there are few domestic enterprises that fully master the technology for purifying wet-process phosphoric acid to produce high-concentration, high-purity purified phosphoric acid. With China's increasingly stringent environmental protection regulations and the impact of policies like power rationing, the new energy capacity of hot-process phosphoric acid is difficult and the utilization rate is low. Wet-process purified phosphoric acid is gradually becoming the primary choice for phosphorus chemical companies when constructing projects like iron phosphate for industrial phosphoric acid.

Domestic phosphate production capacity is stabilizing.

After reaching a peak in 2018, China's capacity for monopotassium phosphate (MKP) rapidly declined due to stricter environmental policies and supply-side structural reforms. By 2020, the effective capacity of MKP in China had dropped to 18.56 million tons. In 2021 and 2022, there was a slight increase in domestic MKP capacity, but it remained well below the 2018 level. From 2017 to 2019, the capacity for diammonium phosphate (DAP) also showed a downward trend, with the effective capacity in China dropping to 21.91 million tons in 2019, followed by a slight rise, with overall capacity changes being minimal. With the continuous tightening of domestic environmental and related policies, there will be relatively few new capacities for phosphate fertilizers in the future, and there is room for further increase in capacity concentration.

Agricultural prosperity predicts an increase in demand for phosphate fertilizers.

In the second half of 2021, the prices of monoammonium phosphate and diammonium phosphate surged rapidly, which somewhat curbed the demand. In China, the apparent consumption of monoammonium phosphate in 2021 was 8.6407 million tons, a decrease of 9.62% year-on-year; the apparent consumption of diammonium phosphate was 7.2831 million tons, a decline of 12.59% year-on-year.

In 2022, amidst escalating international tensions, the global food security issue has become increasingly prominent. Crop prices have been experiencing high volatility, and it is anticipated that both domestic phosphate fertilizer production and demand will see a recovery throughout the year.

Global shipments of lithium-ion batteries are growing rapidly.

Benefiting from the growth of new energy vehicles and the increasing demand for energy storage batteries, lithium battery shipments have been rising year by year. According to the Start Data of Lithium Battery Big Data, lithium battery shipments reached 601GWh in 2021, a 122% increase, and are expected to reach 1TWh in 2022, a 68% increase, with a projected 4TWh by 2025, representing a 582% growth from 2021.

Lithium carbonate, as a key raw material for the positive electrode of lithium-ion batteries, is experiencing rapid growth due to the soaring shipment of lithium-ion batteries. It is projected that the demand for lithium carbonate will reach 724,000 tons in 2022 and surge to 2.89 million tons by 2025, which will drive a significant increase in demand for sulfuric acid.