2022 was a dramatic year for many commodity markets, triggered first by the Russia-Ukraine conflict commencing in February. This was occurring at a time when the world was beginning to recover from the impacts of the Covid-19 pandemic, which resulted in permanent loss of sulphur supply west of Suez. Amid the supply changes and some sulphur buyers distancing themselves from purchasing sulphur originating from the Russia or shipped via Russian ports, we began to see some trade flow shifts. Meanwhile, during the second half of 2022, there was a notable drop in sulphur demand driven by reduced phosphate fertilizer production rates.
This set the tone going into 2023 with self-sanctioning still in practice and the phosphate fertilizer market suppressed. At the same time, we were beginning to see signs of increased availability from regions such as the Middle East on the start up of new refining and gas processing capacity.
Our presentation will review these recent developments and provide an outlook on what we can expect in the medium-term, particularly with more supply additions east of Suez on the horizon.
Turning to sulphuric acid, the market has been plagued with supply outstripping demand since late 2022 which saw export prices briefly touch negative levels during the first quarter of this year. This was driven in part by notably reduced spot demand from Chile and Morocco as well as weaker domestic demand for industrial applications in the key northwest Europe production hub. The reduced consumption in Europe was driven by higher energy costs due to the Russia-Ukraine conflict. There was some offset in Europe, however, by reduced throughput at some smelters due to the energy intensity of processes.
Meanwhile, significant freight variations from the northwest Europe region versus Asia, the other top supply region, also contributed to a change in trade flows.
While demand from historical import markets so far this year has been weaker, we are seeing more steady demand from markets like Indonesia. This is driven by the development of nickel leach operations there to support the electric vehicle (EV) evolution.
We will review each region and provide an outlook on changes in supply and demand.
Finally, we will touch upon longer-term market impacts such as the EV evolution and emerging industries.