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 $50-
70/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?

PentaSul
World Sulphuric Acid Supply Trends

PentaSul
Sulphuric Acid - End Uses

PentaSul
SULPHURIC ACID in PHOSPHATE

Up to $30/tonne acid
of byproduct SULPHUR - one tonne
energy available
SULPHURIC ACID - 3 tonnes

PHOSPHATE ROCK - 3 tonnes

PHOSPHORIC ACID
one tonne P2O5

PHOSPHATE FERTILIZERS
0.5 tonne NH3
DAP - two tonnes

PentaSul
 Copper Price History
$/tonne
10000
9000
8000
2.5 to 3.5 tonnes acid
7000
per tonne copper.
6000
5000
4000
3000
2000
1000
0
02 03 04 05 06 07

PentaSul
 Sulphuric Acid Long-Haul Trade 2006

1.2
0.3 0.5
0.5 0.2
2.3
0.5 0.3 0.1 0.4
0.6
0.1
0.3 0.6

0.5
Total Trade 11.8 0.1
Seaborne 7.2
million tonnes Long-Haul 5.3 PentaSul
 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.
PentaSul
 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.

PentaSul
Spot Purchases for Chile Started the Upturn

PentaSul
Chile Imports Much More in 2007

Chiles long-haul acid imports surge, even

with increased imports from Peru.
PentaSul
Far East Sulphuric Acid Exports
million tonnes

PentaSul
 Japan, Korea both export more

Surging world prices attract more sales outside the region.

Less to China. PentaSul
 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 04

PentaSul
China Sulphuric Acid Imports
000 tonnes

PentaSul
 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?
PentaSul
 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.
PentaSul
 Sulphur Prices
Does this signal a
Why are sulphur prices high? fundamental change in
pricing structure?
Production (supply) Probably not.
development slower than Higher costs raise price
expected as projects slow floor level.
to come online on labor Production restrictions will
and cost constraints.
eventually be removed.
Canada and Russia
Domestic sulphur
exports fall in Q1 2007.
production in China will
Strong demand by China. grow and reduce the need
Phosphate market shows for imports.
strength.

PentaSul
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

PentaSul
Major Suppliers Provide less Sulphur in Q1-2007

RUSSIA/VANCOUVER: QUARTERLY
OFFSHORE EXPORTS
'000 tonnes
4000
Vancouver Russia Estimates
3000

2000

1000

0
1 2 3 4 1 2 3 4
2006 2007
Vancouver 25% decline
Russia 50% decline
PentaSul
 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 PentaSul
 DAP Price History
TAMPA DAP PRICE
800
$/tonne f.o.b.
700
600 0.5 tonne sulphur
500 per tonne DAP
produced.
400
300
200
100
03 04 05 06 07 08
PentaSul
 Sulphur supply was less than
expected in 2007
000 tonnes Revised
Forecast Estimate
Canada gas 6,225 5,500
Kazakhstan 2,350 1,600
China gas 480 80
Saudi Arabia 2,750 2,450
U.S. oil 7,350 6,950
Source: IFA/FRC

PentaSul
 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

0
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

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

PentaSul
World Elemental Sulphur Production and Demand
Forecast
000 tonnes S

25%
22%
China as % 13%
World 2% 7%
demand

PentaSul
 World Sulphur Balance & Price Forecast
US$/tonn
? e

Source: IFA/FRC

Revised January 2008 PentaSul

 North America
Sulphuric Acid Market
Struggle to obtain offshore imports

PentaSul
US Sulphuric Acid Market

PentaSul
North America - Recent Developments
Total absence of sea-borne imports in first-
half 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.

PentaSul
US Imports Ocean Going Now Minimal

Rail deliveries from Mexico depressed in 2006/7.

PentaSul
 Mexico Acid Availability Poor

Mine strikes curtail acid availability for Southwestern US market

PentaSul
 Canada - Sulphuric Acid Balances

Sulphuric Acid Balance 2006

million tonnes H2SO4
Prodn. 4.8
- smelters 3.2
- elemental 1.6
Cons. 2.8 2.0
- fertilizers 1.5 2.1
- non ferts. 1.3 0.8 2.7
Net Exports 2.0 0.1 2.1
Dom. Purchases 0.9

PentaSul
North America Sulphuric Acid Trade
1980 - 2006

PentaSul
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.
PentaSul
Long term US acid balance shows
few offshore imports

PentaSul
 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.
PentaSul
 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.

PentaSul