sulphur market outlook - creon conferences · sulphur demand is generally weak, but china saves the...
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LONDON | RALEIGH | WASHINGTON | MINNEAPOLIS| BEIJING
Sulphur Market Outlook
The Outlook for the future Supply and
Balance of the Global Sulphur Market
Joanne Peacock, CRU International/BSC
Creon – Moscow – December 2009
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2
This presentation will review:
• Global Overview and Recent Market Developments
– The Economic Crisis
– Post-Crash
• The Supply Outlook:
– Global Market
– Middle East
– North America
– East Asia
– CIS
• The Balance Outlook
• Conclusions
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Global Overview and Recent
Developments:
a) The Impact of the Global
Financial Crisis
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Following a long period of market surplus, global
deficits emerged in 2005-2007 as demand for
sulphur soared...
-2
-1
0
1
2
3
4
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
(millio
n t
on
nes)
Global supply surplus 3.4 Mt.
Prices at record lows.
Global supply deficit 0.7 Mt.
Prices soaring.
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…phosphate fertilizer prices rose…
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1992 1994 1996 1998 2000 2002 2004 2006 2008
US
$ p
er
ton
ne
Phosacid fob N. Africa DAP fob Tampa
High grain prices, biofuels boost demand
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…and Chinese import demand continued to
grow, rising almost 1 million tonnes Y-O-Y, between
2006-2007.
0
500
1000
1500
2000
2500
3000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2006 2007 2008
(th
ou
san
d t
on
nes)
North America Far East Middle East/FSU/Other
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During H2 2008, the global economic crisis caused
demand destruction in the commodity markets…
• Most major economies began to shrink, as demand and confidence plummeted.
• World trade slowed.
• Sulphur prices crashed as the prices of crude oil, metals, grains etc fell sharply.
• Cutbacks were announced by virtually all major phosphate producers.
• Sulphur started to back up in the pipeline.
• Distress sales became common.
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• A special export tax on fertilizer was
introduced April-September 2008, and
later extended to December 2008.
• The Olympics and the Sichuan
earthquake depressed sulphur demand
further.
• China became awash with sulphur,
sulphuric acid and finished phosphate
fertilizers.
…and China and India had problems of their
own.
• The 2008-09 budget allocation for
fertilizer subsidies was Rs 310 bn ($6.2
bn)…
• …however, the estimated requirement
was Rs 1,200 bn ($24.2 bn)…
• …with the MRP for DAP at Rs 9,350/t
($188.50)…
• …fertilizer producers were reluctant to
commit to raw material purchases at
high prices.
China India
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The Adnoc monthly contract price fell $785/t
between July 2008 and February 2009
0
100
200
300
400
500
600
700
800
900
S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M
2006 2007 2008 2009
($/t
on
ne
fo
b R
uw
ais
)
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Global Overview and Recent
Developments:
b) Post Crash…
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0.00
5.00
10.00
15.00
20.00
25.00
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2007 2008 2009
$/b
bl
WTI - Maya Brent - Arab Heavy
Sulphur production has fallen, affected by the drop
in crude oil demand, weak refining margins and
narrowing sweet:sour price differentials.
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Sulphur demand is generally weak, but China
saves the day with record-breaking imports.
Country 2008 2009 Period
China 6,858 9,718 Jan-Oct
Brazil 1,857 1,224 Jan-Oct
Morocco 2,328 1,673 Jan-Aug
United States 1,850 827 Jan-Jul
Australia 634 371 Jan-Sep
South Africa 774 494 Jan-Sep
(‘000 tonnes)
+3,662
-2,854
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…and prices have shown some signs of recovery.
ADNOC monthly contract price
0
100
200
300
400
500
600
700
800
900S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2006 2007 2008 2009
($/t
on
ne f
ob
Ru
wais
)
Aug 09 $33/t
Sep 09 $40/t
Oct 09 $45/t
Nov 09 $50/t
Dec 09 $57/t
?
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The Outlook for Production
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Annual brimstone production grows by 23.6 Mt
between 2009-2017, at a CAGR of 3.9%
0
10
20
30
40
50
60
70
80
90
2007 2009 2011 2013 2015 2017
(millio
n t
on
nes)
RoW East Asia FSU Middle East North America• Strongest growth is
in Middle East, N
America, E Asia and
FSU.
• All growth is from
involuntary
production.
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Middle East production grows by 9.8 million
tonnes between 2009-2017.
0
5
10
15
20
25
2007 2009 2011 2013 2015 2017
(millio
n t
on
ne
s)
Others Kuwait Iran
Qatar Saudi Arabia UAE
• Major increases in UAE
(+4.5 Mt), Qatar (+2.1 Mt)
and Saudi Arabia (+2.3 Mt).
• Many projects have
suffered delays.
• More non-associated gas
is urgently needed,
especially in Saudi Arabia
and the UAE.
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North America: +1.0 million tonnes
2009-2017
0
5
10
15
20
25
2007 2009 2011 2013 2015 2017
millio
n t
on
nes
Canada USA• Canadian production
from gas declines, offset
by growth from oil sands.
•Production in the United
States grows at CAGR of
1.7%
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East Asia: +5.4 million tonnes
2009-2017
0
1
2
3
4
5
6
7
8
9
10
11
12
2007 2009 2011 2013 2015 2017
millio
n t
on
nes
Oil etc Gas
• Almost all regional
growth from China.
• Most growth comes
from gas production at a
CAGR of 33% between
2009-2017
China produces >7 Mt/y by 2017
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CIS: +3.5 million tonnes
2009-2017
0
2
4
6
8
10
12
14
2007 2009 2011 2013 2015 2017
(millio
n t
on
nes)
Russia Kazakhstan Others• Tengiz expansion completed
Sep 2008.
• Kashagan on stream Q4 2012.
Sulphur capped at 3,800 t/d.
Storage of 4 Mt sulphur in
covered block approved.
• Some growth in Russia
(Orenburg). New sour gas
plants in Turkmenistan and
Uzbekistan.
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The Outlook for Balance
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The surplus production in the Middle East is the most
important influence on the global market balance.
-2
0
2
4
6
8
10
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
(millio
n t
on
nes)
57 million tonnes to stocks
globally, 2009-2017
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Conclusions
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Conclusions
• There is no new paradigm of sulphur pricing.
• We are heading for a period of chronically weak market conditions.
• Supply will need to be very carefully managed.
It would seem that our forecasts of production may be too high
and/or our projections of demand are too low, but the conclusions
drawn from the analysis are valid: