Sulphuric Acid Market

Presented at

ISM Chemical Group

Winter Meeting 2008
Galveston, TX
February 28, 2008

rboyd@pentasul.com

PentaSul

Sulphuric Acid a hot market!!

In the US prices have tripled to an all-time
high in the last twelve months, from $5070/st to $150-250/st cfr customer tank.
Why did they get so high?
Have they peaked?
When will the market turn?
Is this a structural change?
How low will prices go and when?
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World Sulphuric Acid Supply Trends

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Sulphuric Acid - End Uses

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SULPHURIC ACID in PHOSPHATE

Up to $30/tonne acid
of byproduct
energy available

SULPHUR - one tonne

SULPHURIC ACID - 3 tonnes
PHOSPHATE ROCK - 3 tonnes
PHOSPHORIC ACID
one tonne P2O5

PHOSPHATE FERTILIZERS
DAP - two tonnes

0.5 tonne NH3

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Copper Price History

$/tonne

10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0

2.5 to 3.5 tonnes acid

per tonne copper.

02

03

04

05

06

07
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Sulphuric Acid Long-Haul Trade 2006

1.2
0.3
0.5
0.5

0.5

0.2
2.3

0.3

0.1

0.6

0.4

0.1
0.3
0.5
million tonnes

0.6

Total Trade 11.8

Seaborne
7.2
Long-Haul
5.3

0.1
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Market Developments
A spike in import demand in Chile in late
2006 started the acid price surge.
By mid-2007 world sulphur prices started
to move as well.
Not fully reflected in the United States until
Q1-2008.
Sulphur increase began to be passed
through to US sulphuric acid buyers.
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Chile Sulphuric Acid Imports

(million tonnes)

Growth in first-quarter
2007 based on expected
arrivals from Peru.
Q2-2007 shows imports
from other sources
returning to more
manageable level.
And Q3 even more so.

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Spot Purchases for Chile Started the Upturn

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Chile Imports Much More in 2007

Chiles long-haul acid imports surge, even

with increased imports from Peru.
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Far East Sulphuric Acid Exports

million tonnes

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Japan, Korea both export more

Surging world prices attract more sales outside the region.

Less to China.
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Japan needed the US as a swing

market until it developed China
JAPAN: EXPORTS TO THE U.S.A.
million tonnes
0.8
0.6
0.4
0.2
0
92

93

94

95

96

97

98

99

00

01

02

03

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04

China Sulphuric Acid Imports

000 tonnes

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New Acid Supply

(000 tonnes)

Bulgaria expansion complete to add 170.

Egypt 420 imminent. Displaces around 200 imports from
India.
Finland 340 by January 2008. Part from Harjavalta
expansion part from Growhow.
Namibia 300 end-2010. Displacing 225/250 imports.
Chile Altonorte up 300 Q1-2009.
Cuba 400 end-2009. Displacing imports.
Peru Doe Run up 315 by end-2009. New exporter.
Cajamarquilla up 280 in 2010. Ilo up 500 in 2010?
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New Acid Demand

(000 tonnes)

Turkey Caldag will look for start-up tonnes in 2009.

Finland Talvivaara needs 280-320,000 t.p.a. from 2010.
Cuba Debottlenecking prior to new acid plant completion in
2009.
Philippines Doubling of Coral Bay Nickel will add 260 to
import demand Q2-2009.
U.S.A. Freeport needs 250-350 for Safford, AZ.
U.S. Gulf/Mexico Phosphate producers could use a lot
more if affordable.
Chile Gaby among several imminent projects.
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Sulphur Prices
Why are sulphur prices high?

Does this signal a

fundamental change in
pricing structure?

Production (supply)
development slower than
expected as projects slow
to come online on labor
and cost constraints.
Canada and Russia
exports fall in Q1 2007.
Strong demand by China.
Phosphate market shows
strength.

Probably not.
Higher costs raise price
floor level.
Production restrictions will
eventually be removed.
Domestic sulphur
production in China will
grow and reduce the need
for imports.

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Late 2006 sulphur prices were still declining!

$/tonne

VANCOUVER - ADNOC(ME) PRICE COMPARISON

90
80
70

Vancouver

60

ADNOC

50
40
30
20
10
0
01

02

03

04

05

06

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Major Suppliers Provide less Sulphur in Q1-2007

RUSSIA/VANCOUVER: QUARTERLY
OFFSHORE EXPORTS
'000 tonnes
4000
Vancouver

Estimates

Russia

3000
2000
1000
0
1

2006

2007

Vancouver 25% decline

Russia
50% decline

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ADNOC posting (fob)

$240/tonne November 1st
$360/tonne December 1st
$495/tonne January 1st
$600/tonne February 1st

Accelerating rate of price increases:

$54-$100 elapsed time 5 months
$100-$200 4 months
$200 - $600 less than 4 months

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DAP Price History

TAMPA DAP PRICE
$/tonne f.o.b.

800
700
600

0.5 tonne sulphur

per tonne DAP
produced.

500
400
300
200
100
03

04

05

06

07

08
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Sulphur supply was less than

expected in 2007
000 tonnes
Forecast

Revised
Estimate

Canada gas

6,225

5,500

Kazakhstan

2,350

1,600

480

80

Saudi Arabia

2,750

2,450

U.S. oil

7,350

6,950

China gas

Source: IFA/FRC

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More sulphur in the longer term, but

slightly reduced growth to reflect delays in
the short term
ANNUAL GROWTH IN SULPHUR PRODUCTION - %
10
forecast
8
all-form s

elem ental

6
4
2
0
95

96

97

98

99

00

01

02

03

04

05

All forms; sulphuric acid, SOX, Ammonium sulphate, etc.

06

07

08

09

10

11

12

13

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14

15

World Elemental Sulphur Production and Demand

Forecast
000 tonnes S

25%
22%
China as %
World
demand

2%

7%

13%

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World Sulphur Balance & Price Forecast

?

US$/tonn
e

Source: IFA/FRC

Revised January 2008

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North America
Sulphuric Acid Market
Struggle to obtain offshore
imports

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US Sulphuric Acid Market

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North America - Recent Developments

Total absence of sea-borne imports in firsthalf U.S. imports. Four cargoes booked for
second half by Interacid/SATCO.
Martin adds 400 t/day production in Texas.
DuPont in start-up at El Paso.
FCX 20-30,000 t.p.m. requirement for Safford
started January 1, 2008 - not covered.

PentaSul

North America Late Breaking News

Southern States to add 200,000 t/yr. capacity at
Wilmington, NC, bought gently-used old burner
from US ordinance plant.
Chemtrade Logistics decides not to sell after
lengthy bidding process.
Vale Inco tenders sulphur products marketing,
stays with Chemtrade.
Vale bids for Xstrata. Canada competition??
Martin to build 400 t/day merchant plant at
Beaumont.
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US Imports Ocean Going Now Minimal

Rail deliveries from Mexico depressed in 2006/7.

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Mexico Acid Availability Poor

Mine strikes curtail acid availability for Southwestern US market

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Canada - Sulphuric Acid Balances

Sulphuric Acid Balance 2006
million tonnes H2SO4
Prodn.
- smelters
- elemental
Cons.
- fertilizers
- non ferts.
Net Exports
Dom. Purchases

4.8
3.2
1.6
2.8
1.5
1.3
2.0
0.9

2.0
2.1
0.8 2.7
0.1

2.1

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North America Sulphuric Acid Trade

1980 - 2006

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Latin America the Key Import Region

Taking account of Mexicos exports out of the region and

Chiles higher than expected net imports, Latin American
imports will be even stronger than forecast.
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Long term US acid balance shows

few offshore imports

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US Acid Prices May Track Sulphur

$250-270
In 2008

But only when global smelter acid surpluses need to be absorbed here
Or when sulphur-based acid is part of merchant supply.
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North America Points to Watch

How FCX acid procurement for Safford via
Martin goes, impact on Southwest balance.
Implications of Vale and Xstratas cooperation in
Sudbury area or a merger of the two?
Construction of new spent acid regeneration
capacity to service refinery expansions.
Use of any sulphur-based capacity in the US in
next phosphate downturn in the merchant acid
market.
PentaSul

Summary and Market Outlook

Prices in the US have tripled in 12 months.
Caused first by world demand for imports bidding up the
price, driven by strong end- product prices.
Then the sulphur effect later in 2007 was additive.
All markets look set to remain strong through 2008.
During 2009 new supply of smelter acid and sulphur will
begin to materialize and the market should turn.
Sulphuric acid prices in the US should be back below
$100/st by 2010, but will not return to the sub-$50 range.
Reason: the US will be supplanted by China as the dumping
ground for the next round of smelter acid surpluses.

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