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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
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
Global Overview and Recent
Developments:
a) The Impact of the Global
Financial Crisis
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.
…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
…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
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.
• 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
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
)
Global Overview and Recent
Developments:
b) Post Crash…
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
$/b
bl
WTI - Maya Brent - Arab Heavy
Sulphur production has fallen, affected by the drop
in crude oil demand, weak refining margins and
narrowing sweet:sour price differentials.
Sulphur demand is generally weak, but China
saves the day with record-breaking imports.
Country 2008 2009 Period
China 6,858 9,718 Jan-Oct
Brazil 1,857 1,224 Jan-Oct
Morocco 2,328 1,673 Jan-Aug
United States 1,850 827 Jan-Jul
Australia 634 371 Jan-Sep
South Africa 774 494 Jan-Sep
(‘000 tonnes)
+3,662
-2,854
…and prices have shown some signs of recovery.
ADNOC monthly contract price
0
100
200
300
400
500
600
700
800
900S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2006 2007 2008 2009
($/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
?
The Outlook for Production
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.
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.
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%
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
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.
The Outlook for Balance
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
Conclusions
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:
