2023 Fertilizer Outlook: Greater Stability Forecast for Sulfur
By Daryl Schuster, President, Keg River Chemical
What a rollercoaster year 2022 was for the Plant Nutrient Sulfur (PNS) business.
In the last 25 years, there have only been two periods where I have stopped buying molten sulfur because of outrageously high costs. That was in 2008 and 2022. Both times, prices had increased beginning in January and collapsed in the summer.
Last January, when the price of sulfur increased by 93% over the average 2021 price, I felt like we had been down this road before.
By May 2022, the cost was up 240% over the average price of 2021. Outbound freight costs also rose by 57% in that same time frame: despite the fact, there was no assurance that any trucks were available, regardless of the rate.
In March I wrote several blogs and social posts cautioning against carrying a high inventory into the summer. Keg River stopped buying molten sulfur in the second week of June after our cost peaked at $521 tonne delivered. We had a four-week maintenance turnaround planned for June, which we decided to extend to 10 weeks. We did not purchase any more sulfur until there was relief from the suppliers. We predicted a correction.
A decision to hold tight.
Many fertilizer companies continued to produce material in the summer of 2022, which was seriously overvalued. This likely had an impact on their returns and that of their customers in the fall.
Instead, Keg River made a conscious decision to halt summer production to avoid carrying overpriced inventory that would lead to higher prices or require a write-down.
Unlike the previous year where we warehoused 2,200 tons in totes for the fall season, our warehouses were bare. We wanted to take a wait-and-see approach, anticipating that prices would fall based on market indicators.
That decision proved to be the correct one, as prices did indeed settle out.
In the fall, we were able to buy sulfur at a drastically lower price, ramp up production, and pass the significant savings onto our customers.
Lower foreign demand stabilizes North American S costs.
The collapse in the offshore market last summer proved to have a significant impact on the price of molten sulfur. It continues to result in a favorable cost to sulfur fertilizer manufacturers and will provide foreseeable stability to customers into 2023.
A new pricing strategy for 2023.
Considering the turmoil of 2022, Keg River has changed our pricing strategies to address the cost of raw materials and freight more accurately. (As described in this previous post).
We’re now a month into the new year. The cost of sulfur appears to have flattened out for the time being and we are expecting to see a more normal spring season.
The value of an experienced partner.
Situations like we saw in 2022 help demonstrate that with experience comes value.
As a fertilizer manufacturer that’s been in business since 1998, and follows the markets like a hawk, we were able to read which way the wind was blowing. Our relative size also afforded us the agility to pivot quicker than some of our competitors.
I’m happy to say that the biggest beneficiary was our customers, and the farmers they supply. In these inflationary times, it’s important to have a manufacturer who is taking the initiative to help you cut down on your costs and protect your margins.