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Sulphur 407 Jul-Aug 2023

Unintended consequences?


Editorial

Unintended consequences?

“There is a trade-off between sulphur recovery levels and climate action”

The modern sulphur industry is in effect a response to the environmental problems created by the presence of sulphur compounds in oil and gas, and the consequent release of sulphur dioxide when they are burned. The tens of millions of tonnes extracted, formed, traded and used for sulphuric acid production every year would otherwise be entering the atmosphere and causing health issues, especially in major cities, or returning as acid rain. One of the most recent step changes in sulphur recovery has come from the extension of rules on sulphur content of fuels that have been commonplace for road vehicles for many years into the maritime transport sphere. The International Maritime Organisation has mandated a reduction in sulphur content of bunker fuels to 0.5% worldwide, and 0.1% in busy shipping regions that have become designated emissions control areas (ECAs). Because bunker fuels were made from refinery residues, they often had high concentrations of sulphur in them; the limit before 2020 was 3.5%. As a result, a recent paper by two climate scientists calculates that global SO2 emissions have dropped by as much as 10% since 2020 because of the IMO limits. Given that atmospheric sulphur dioxide is responsible for an estimated 20-90,000 preventable deaths per year, this is surely a good thing.

Now, however, three years into the new regulations, there are signs that this reduction may perhaps be a double-edged sword. As we have discussed before, sulphur dioxide not only reflects incoming sunlight but can also act as a nucleus around which water droplets can form, in effect ‘seeding’ cloud formation, especially at stratospheric levels. This effectively lowers global temperatures by reflecting sunlight back into space, an effect known as radiative forcing. Indeed, only in January this year we reported on a plan to deliberately release SO2 at high levels to try and reduce global temperatures, as can happen in the wake of large-scale releases of SO2 from volcanic eruptions. The well intentioned reduction in SO2 emissions from shipping has therefore potentially reduced this effect, particularly across the North Atlantic and North Pacific oceans, where the busiest shipping lanes are. At the same time, there has been a spike in global sea surface temperatures to the highest levels recorded, and which is around 0.6°C above the mean for 1982-2011.

In a paper written this month for Carbon Brief, Dr Zeke Haushofer and Prof Piers Forster, director of the Priestly International Centre for Climate, discuss whether the two are linked. There is a major complicating factor in that the oceans are also a source of large-scale natural dimethyl sulphide emissions produced by marine bacteria and plankton, and in fact this is roughly three times the size of SO2 emissions from shipping. Using a range of widely accepted values for radiative forcing, they calculate that the impact of the IMO ban is probably only an additional 0.05°C of warming, and that the current ocean temperature spike is more likely a result of the move from a La Nina to an El Niño year. Even so, that’s 3% of the 1.5°C increase in global temperatures compared to pre-industrial levels that the Intergovernmental Panel on Climate Change is recommending that we try to limit ourselves to, and a reminder that environmental legislation can have unintended consequences. Industry figures such as Angie Slavens have warned before that, beyond a certain level of sulphur recovery in a Claus plant, moving to the most stringent levels of reduction (such as the 99.99% that some bodies have recommended) can lead to a major increase in carbon dioxide emissions. In effect, there is a trade-off between sulphur recovery levels and climate action, and one that should be borne in mind when future restrictions on sulphur content of fuels are contemplated.

Latest in Outlook & Reviews

Price Trends

Global sulphur prices were mostly assessed flat in mid-January, with only slight changes for China, Indonesia and India, while the first quarter contracts for the Middle East, North Africa and Tampa increased from the previous quarter. Overall, the number of transactions taking place globally has declined as subdued demand has limited trading activity in most delivered markets. The current sulphur price environment has been shaped by the combination of rising Chinese demand and higher Middle East f.o.b. prices in the second half of last year. As a result, some consumer markets such as Indonesia and India have been subject to upward pressure in order to remain attractive destinations. But demand remained lacklustre across delivered markets, leaving prices relatively stable.

Protectionism casts a shadow over the new year

The start of a new year is a traditional time to take stock of the previous 12 months and look ahead to the next. In this regard, CRU’s most recent annual client survey, conducted at the end of December last year, makes interesting reading as to your own concerns for 2025 and beyond. There were numerous responses across commodity and financial sectors, and broadly based worldwide, if slightly skewed towards Europe and North America, but across all of these the key worry for the coming year clearly emerged as trade tariffs and protectionism. This is perhaps unsurprising, given incoming US president Donald Trump’s avowed intent to impose blanket 20% tariffs on all goods entering the US, and up to 60% on China. While most clients did not think tariffs would rise as much as some of Trump’s rhetoric might suggest, most expect rises of 5-10% across the board, and Asian businesses are most concerned. CRU’s most recent position paper on US tariffs highlights some of the internal political and legal challenges in implementing these, but does acknowledge that some rises will be inevitable, and may well produce the kind of reciprocal measures last seen in the previous Trump administration’s trade war with China and the EU in 2018.