SULPHURIC ACID 

OUTLOOK
CRU COPPER CONFERENCE
SULPHURIC ACID SEMINAR
 APRIL 2016
DR. PETER HARRISSON
TEAM LEADER,
SULPHUR & SULPHURIC ACID
: +44 207 903 2249
: peter.harrisson@crugroup.com
Presentation Overview

 REVIEW OF RECENT TRADE AND PRICES

 WHERE AND WHY HAVE PRICE FALLEN SINCE H2 2015
 TRADE FLOWS IN 2015
 CHILEAN IMPORT TRENDS
 THE EMERGENCE OF MEXICAN EXPORTS

 WHAT HAS CHANGED IN 2016?

 DIVERGENCE OF FORTUNES IN EUROPE AND ASIA
 INFLUENCE OF SULPHUR PRICES

 M ARKET OUTLOOK FOR 2016 AND BEYOND
 E AST ASIA, SOUTH E AST ASIA, SOUTH AMERICA,

 CONCLUSIONS
2
Prices
Sulphuric acid prices, 2012-2016

CFR NW Europe* CFR US Gulf CFR Chile (spot)

CFR Brazil FOB NW Europe FOB Japan/ S Korea

150

130

110

   t 90
   /
   $
   D
   S
   U70

50

30

10

-10
2012 2013 2014 2015 2016
Data  CRU 3
Trade developments in the Atlantic market
Imports strong but disruptive exports affect market balance

SULPHURIC ACID TRADE 2015
MILLION TONNES
CANADA

2.07 1%
EUROPE

USA 5.55 4%

3.52 9% MOROCCO JAPAN /SOUTH KOREA

CHINA
MEXICO CUBA 0.88 1% 5.71
2%
1.17 16%
0.40 5%
INDIA
1.25 65%
1.34 65% THAILAND

BRAZIL
0.58 16%
NAMIBIA
Imports 0.59 9%
0.14 1%
CHILE
Exports
2.18 3%
% y-o-y change

Data  CRU 4
Chile acid imports
Steady decline in acid import volume trend

400
2014 2015
2.26 Mt 2.18 Mt
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
0.56 Mt 0.59 Mt 0.54 Mt 0.56 Mt 0.60 Mt 0.59 Mt 0.48 Mt 0.51 Mt
  s 300
  e
  n
  n
  o
   t
   d
  n
  a
  s
  u 200
  o
   h
   t

100

0
J F M A M J J A S O M D J F M A M J J A S O N D
2014 2015

Peru Japan South Korea Mexico ROW 12-month rolling average monthly import t/m
Data  CRU 5
Mexico acid exports
Increased sales focused on competing for the Americas

USA Chile Peru Brazil Other Quarterly Exports ('000 tonnes)

200 360

345 340
311 310

150 254
260

216
  s 206
210

  e 199 201

  n
  n 177
  o
   t
100 161 160
  n
160

  o
   i 139
   l
   l
   i
  m 110

50 60

10

0 -40

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15
Data  CRU 6
Mexican acid export outlook
How will El Boleo act in 2016 and beyond?

Mexico - sulphur-burnt acid supply and exports El Boleo - sulphuric acid export forecast
0.6 60 0.6

0.5   s 0.5

  e
  s   n
  e   n
  n   o
   t
  n
  o0.4
   t 40    0 0.4
   0   s
  n    0
   '   e
  o
   i   -   n
   l
   l   n
   i   n   o
  m   o
   i    t
0.3    t   n
0.3
  -   c
  n   u   o
   i
   d    l
   l
  o
   i    i
   t   o
  r
  c   m
  u0.2 20   p
  r 0.2
   d   e
  o
  r   p
   P   p
  o
   C
0.1 0.1

0.0 0 0.0
14 15 16 17 18 19 20 15 16 17 18 19 20
Chile Brazil
 Acid Production Acid Demand
Morocco Other
 Acid Exports Copper Production Total Exports - Basecase Total Exports - Highcase
Data  CRU 7
Presentation Overview

 REVIEW OF RECENT TRADE AND PRICES

 WHERE AND WHY HAVE PRICE FALLEN SINCE H2 2015
 TRADE FLOWS IN 2015
 CHILEAN IMPORT TRENDS
 THE EMERGENCE OF MEXICAN EXPORTS

 WHAT HAS CHANGED IN 2016?

 DIVERGENCE OF FORTUNES IN EUROPE AND ASIA
 INFLUENCE OF SULPHUR PRICES

 M ARKET OUTLOOK FOR 2016 AND BEYOND
 E AST ASIA, SOUTH E AST ASIA, SOUTH AMERICA,

 CONCLUSIONS
8
Out of Sulphur and into Acid
What was the incentive to switch?

Back to basics
Elemental Sulphur Sulphur Burner Sulphuric Acid

1 tonne 3 tonnes

Comparative pricing
 Sulphur raw material value /tonne sulphuric acid = Sulphur price/3

 If sulphuric acid price < sulphur raw material value  there is incentive to switch

 Power credits, logistical issues, contracts can prevent switching but...

 Substitution only feasible if sulphuric acid price < sulphur raw material value

Data  CRU 9
Out of Sulphur and into Acid
What is the incentive to switch?

Contained S price differential Sulphur CFR Sulphuric Acid CFR

India China
200 200
160 160
120    t
   / 120
   t
   /    $
   $ 80    S 80
   S    U
   U 40 40
0 0
-40 -40
2013 2014 2015 2016 2013 2014 2015 2016

SE Asia USA
200 200
160 160
120 120
   t
   /    t
   /
   $ 80    $ 80
   S    S
   U 40    U 40
0 0
-40 -40
2013 2014 2015 2016 2013 2014 2015 2016

Data  CRU 10
Presentation Overview

 REVIEW OF RECENT TRADE AND PRICES

 WHERE AND WHY HAVE PRICE FALLEN SINCE H2 2015
 TRADE FLOWS IN 2015
 CHILEAN IMPORT TRENDS
 THE EMERGENCE OF MEXICAN EXPORTS

 WHAT HAS CHANGED IN 2016?

 DIVERGENCE OF FORTUNES IN EUROPE AND ASIA
 INFLUENCE OF SULPHUR PRICES

 M ARKET OUTLOOK FOR 2016 AND BEYOND
 E AST ASIA, SOUTH E AST ASIA, SOUTH AMERICA,

 CONCLUSIONS
11
 Acid imports trends in 2016
Demand weakness sets in

Imports 2015 Imports 2016

USA
Europe
3.45 3.25 5.55 5.06
China
Cuba Morocco
1.17 1.10
0.40 0.23 0.88 0.75 India
Philippines
1.24 1.00
Brazil 1.76 1.63
Indonesia
Namibia
0.59 0.71 0.37 0.56
0.14 0.15
Chile

2.17 2.10

million tonnes
Data – CRU 12
 Asian Imports respond to oversupply
But exports also increase with growth in the Philippines

Indonesia Imports Philippines Imports Other SE Asia Imports

Philippines Exports Other Exports Net Trade
2.0

0.70 0.80 0.90 0.90 0.90

0.40
  s 0.0
  e -0.39 -0.41 -0.37 -0.46
  n -0.56 -0.72 -0.81 -0.66
  n
  o
   t
  n
  o
   i
   l
   l
   i
  m -2.0

-4.0
2013 2014 2015 2016 2017 2018 2019 2020
Data  CRU 13
 Acid Exports
Emergence of new exporters to challenge market structure

Major acid exporters, y-o-y change Major acid exporters - total export forecast
Mexico Canada Japan/S Korea
2015 2016 2017 Philippines Peru Europe

6.0
Philippines

Iran

Mexico
  s
  e 4.0
  n
  n
Peru   o
   t
  n
  o
   i
   l
   l
Bulgaria    i
  m

Canada 2.0

Japan

South Korea

-0.50 -0.25 - 0.25 0.50 0.0

10 11 12 13 14 15 16 17 18 19 20
million tonnes
Data  CRU 14
 Acid imports
Change in the order of the world

Major acid importers, y-o-y change Major acid importers - total import forecast
Chile USA Morocco Brazil
2015 2016 2017
Philippines India China
Philippines 3.5

Indonesia 3.0

Brazil   s 2.5

  e
  n
  n
Chile   o
   t
  n 2.0
  o
   i
   l
   l
   i
Cuba   m
1.5

India
1.0
Morocco
0.5
China
0.0
-0.50 -0.25 - 0.25 0.50 10 11 12 13 14 15 16 17 18 19 20
million tonnes
Data  CRU 15
Chile acid balance forecast
Ex-regional balance stable for remainder of the decade

Chile/Peru – Supply and Demand Chile imports and forecast

10.0 3.5 80%

3.0 70%
5.0
2.5 60%
  s   s
  e   e
  n   n
  n   n2.0 50%
  o
   t   o
   t
  n
0.0
  n
  o
   i   o1.5
   i 40%
   l
   l    l
   l
   i    i
  m   m
1.0 30%
-5.0

0.5 20%

-10.0 0.0 10%

10 11 12 13 14 15 16 17 18 19 20 10 11 12 13 14 15 16 17 18 19 20
Chile Supply Peru Supply Peru Ex-regional imports
Chile Demand Peru demand Ex-regional % share
Data  CRU 16
Conclusions
New markets must be found

RECENT M ARKET DEVELOPMENTS
  2015 was a good year for imports but supply availability has been stronger
  Weakness is more severe in Asia but Europe is not immune

SULPHUR
 Over supply and weak prices will place pressure on the “Value" of Acid
  Logistics costs will remain important in setting acid market prices

FORECAST
  Supply availability increasing, major effect in Asia in 2016
 But demand also decline in existing markets (Chile, Cuba, Namibia, Morocco)
  New markets are needed but the question is from where?

Data  CRU 17