The Outlook for Sulphur and

Sulphuric Acid
Prepared
p by
y Joanne Peacock,, British Sulphur
p
Consultants, for Creon

LONDON | RALEIGH | WASHINGTON | MINNEAPOLIS| BEIJING

31 Mount Pleasant, London WC1X 0AD UK

Tel +44 20 7903 2132 Fax +44 20 7833 4973
www.crugroup.com
This presentation will review :

PART 1 - SULPHUR
• Recent Developments
• Supply Outlook
• Conclusions
PART 2 – SULPHURIC ACID
• Recent Developments
p
• Supply Outlook
• Key
K C Conclusions
l i
Part 1: SULPHUR
Recent Developments
Late 2006 to mid-2008.
 Supply problems out of Vancouver and Russia
disrupted Q1 2007 exports …
Canada Russia
(thousand tonnes)

3500 0.9 million tonnes below the average of the other quarters

3000

2500

2000

1500

1000

500

0
2006 I II III IV 2007 I II III IV 2008 I II
 … as phosphate fertilizer prices soared.

US $ per tonne Phosacid fob N

N. Africa DAP fob Tampa
2000
1800
1600
1400
High grain prices, biofuels boost demand
1200
1000
800
600
400
200
0
1992 1997 2002 2007
 Chinese demand continued to grow …

2007 imports 9.65 Mt vs 8.81 Mt in 2006

(thousand tonnes)
North America Far East Middle East/FSU/Other
3000
Q3 2007 2.64 million tonnes

2500

2000

1500

1000

500

0
2006 I II III IV 2007 I II III IV 2008 I II
 … and sulphur prices rose - quite slowly at first
but then with increasingg speed.
p
($/tonne fob Ruwais)
900
850
800
750
700 Adnoc monthly contract price rises by $768/t in 20 months
650
600
550
500
450
400
350
300
250
200
150
100
50
0
Nov

Nov

Nov
2005 Jan

Sep

Sep
May

2006 Jan

May

2007 Jan

Sep
May

2008 Jan

May
Mar

Mar

Mar

Mar
Jul

Jul

Jul

Jul
 Market fundamentals supported price
increases.
4 Global supply surplus 3.4 Mt.
Pi
Prices att record
d lows.
l
3

2
n tonnes)

1
(million

-1
Global supply deficit 1
1.2
2 Mt
Mt.
-2
Prices soaring.

-3
3
88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08
19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

20

20

20

20

20
 Recent Developments
Mid-2008 to the present.

What went wrong?

 China

• Fertilizer special export tax introduced Apr-Sep

Apr Sep 2008,
2008 later extended to
Dec 2008.

• Olympics depress sulphur demand further.

further

• China is awash with sulphur, sulphuric acid and finished phosphate

fertilizers.
 The credit crunch

• Commodity prices came under huge pressure as the credit

crunch became a global financial crisis.

• The price of crude oil,

oil metals,
metals grains etc all fell sharply
sharply. Ocean
freights dropped massively as world trade slowed.

• Sulphur could not escape the storm.

 Phosphates

• Demand destruction now in full force.

force

• Production cutbacks have been announced by numerous

fertilizer producers

• Sulphur prices have collapsed. Disposal is now the focus.

 Adnoc Monthly Contract Price

($/tonne fob Ruwais)

900
850
800
750
700
650
600
550
Price falls $620/t
$
500 in 3 months
450
400
350
300
250
200
150
100
50
0
Nov

Nov
2006 Sep

Sep

Sep
2007 Jan

2008 Jan
May

May
Mar

Mar
Jul

Jul
Market Outlook
Supply
 Brimstone production grows by 35.6 Mt.

North America Middle East

FSU East Asia
RoW
90
80

• Strongest growth is in Middle 70

(million tonnes)
East, N America, E Asia and FSU. 60
50
• All growth
th is
i from
f involuntary
i l t
production. 40
30
20
10
007

09

11

13

15

17
20

20

20

20

20

20
 Middle East: + 14.3 million tonnes

UAE Saudi Arabia

Qatar Iran
Kuwait Others
25

20
• Potential is very high: Shah gas-

(million tonnes)
1 bscfd gas @ 33% H2S = 4 Mt/y S.
15
• But
B t potential
t ti l for
f project
j t delays
d l is
i
also high. 10

007

09

11

13

15

17
20

20

20

20

20

20
 North America: +8.1 million tonnes

Canada USA
25
• Canadian production from gas
declines All growth from oil
declines. 20

million tonnes
sands.
15
• Su
Sulphur
p u recovery
eco e y capacity
capac ty at
US oil refineries increases by ~
2.5 Mt/y by 2013. 10

0
07

08
09

10
11

12
13
14

15
16

17
20

20
20

20
20

20
20
20

20
20

20
 East Asia: +6.1 million tonnes
Oil etc Gas
8
China produces >7 Mt/y
7
• Almost all regional growth

milllion tonn es
6
from China
China.
5
• Sour gas in Sichuan yields 4.5
t/y S by 2017.
Mt/y 0 Output from
o oil
o 4
refineries more than doubles.
3

0
07
08
09
10
11
12
13
14
15
16
17
20
20
20
20
20
20
20
20
20
20
20
 FSU: +2.9 million tonnes

Russia Kazakhstan Others

12
• Tengiz expansion complete
Sepp 2008. 10

n tonnes)
• Kashagan on stream Q4 2012. 8
Sulphur capped at 3,800 t/d.

(million
Storage of 4 Mt sulphur in 6
covered block approved.
4
• Minor growth in Russia
(Orenburg). New sour gas 2
plants in Turkmenistan and
U b ki t
Uzbekistan. 0
07

09

11

13

15

17
20

20

20

20

20

20
 Conclusions

• The outlook for sulphur balance remains difficult to predict;

•The
The global economic crisis will affect both consumption and production;

• Nevertheless, it would still appear that we are heading for a long period
of chronically weak market conditions and large supply surpluses.
Part 2: SULPHURIC ACID
Recent Developments
Late 2006 to mid-2008.
 Global demand for fertilisers grew significantly
from late 2007 in response
p to g
growth in China and
India, fuelling rapid price rises
US $ per tonne Phosacid fob N. Africa DAP fob Tampa
p
2000
1800 Tonnes H2SO4 per tonne:
1600 Ph
Phosacid
id = 3
3.0
0
DAP = 1.5 Q1-3 average 2008
1400
1200
1000
800
600
400
200
0
1992 1997 2002 2007
 To meet growing demand within the emerging
economies,, the copper
pp p price soared
000t Cu ¢/lb

LME cash price and supply/demand balance

balance, quarterly
quarterly, 2002-2008
2002 2008
(Q3)
 Acid Imports – Chile, 2002-2008

((thousand tonnes)) Asia Americas Europe

1750
Chile imports 1.61 million t of acid in Jan-Aug 2008
1500

1250

1000

750

500

250

0
2002 2003 2004 2005 2006 2007 2008
 Sulphuric Acid Trade 2008

1.3

03
0.3

0.5

0.4
0.2
0.2 2.0

2008 TRADE FLOWS

Total Trade to Sept
<11 million tonnes; 1.7
Extra-regional
Extra regional Trade 0.4
to Sept > 3.5 million
tonnes
Imports Exports
B
Base Data:
D t IFA,
IFA BSC,
BSC GTIS
 Recent Developments
Mid-2008 to the present.

What went wrong?

Demand Destruction: Fertilizer price increases have
pushed farmer costs past break-even

*at current prices/application rates/yields

Source: USDA, British Sulphur
does not include capital recovery (approx
*does (approx. $0
$0.50)
50)
Copper prices succumb to financial meltdown…
LME cash price and supply/demand balance, quarterly, 2002-2010
Forecast
000t Cu
¢/lb
Brimstone Imports – China, 2005-August 2008

2008
((thousand tonnes)) 2007
2008 VS 2007
1200 400

1000 200

800 0

600 -200

400 -400

200 -600

0 -800
800
Jan Feb Mar Apr May Jun Jul Aug
Market Outlook
Supply
Changes to voluntary sulphuric acid production
capacity
it are/were
/ expected
t d tto ttake
k place
l iin:
• US:
– Freeport McMoran (Safford) – 420ktpa – 2009/2010 - NOW UNDER REVIEW
– Martin Midstream (Beaumont) - 150ktpa – 2009/2010
– Southern
S th St
States
t Chemicals
Ch i l (Wil
(Wilmington)
i t ) – 150ktpa
150kt – 2009/2010
– Ongoing debottlecking and capacity additions within fertiliser sector

• Europe:
– Prayon (350ktpa) – 2009

• Cuba:
– Moa Bay Nickel (400ktpa) – 2010 - NOW UNDER REVIEW

• Namibia:
– Rossing Uranium –to be confirmed – 250ktpa – 2011 - NOW UNDER REVIEW

• Chile - UNDER REVIEW

Changes to involuntary sulphuric acid production
capacity are expected to take place in:

• Central America:
– Mexico – GM currently running at 50% capacity

• South America:
– Chile – Altonorte smelter +400ktpa – 2009/2010
– Peru - all smelters +1million tpa by 2012

• Europe:
– Possible expansions in Germany/Bulgaria by 2011/2012

• Asia (excluding China):

– India
d a - + 300
300-500ktpa
500 tpa by 2010-2012
0 0 0
Conclusions:

• Demand has collapsed around the world;

• Producers are cutting back production in order to manage stocks;
• Prices have collapsed and distress sales are being made;
• Outlook remains difficult to assess – impact on both supply and
demand side;
• However, there will continue to be growing availability from Europe
and Asia (involuntary production).
• Chi remains
China i a huge
h influence
i fl on future
f t global
l b l balance.
b l
• Therefore further market rationalisation may take place.
Sulphur/Sulphuric Acid
Ten Year Forecast & Market Analysis Service

Joanne Peacock
+ 44 20 7903 2121 / +44 7884 361717
joanne.peacock@crugroup.com

LONDON | RALEIGH | WASHINGTON | MINNEAPOLIS| BEIJING

31 Mount Pleasant, London WC1X 0AD UK

Tel +44 20 7903 2132 Fax +44 20 7833 4973
www.crugroup.com