Chilean Copper Commission Research Department
THE CHILEAN SULFURIC ACID MARKET ESTIMATIONS THROUGH 2015
(Revised to April 2009)
DE / 05 / 2009
Intellectual Property Registration No. 180076
Contents
Executive Summary ........................................................................................................i
I. Introduction .............................................................................................................. 1
1.1 Purpose and Contents ......................................................................................... 1
1.2 Explanation............................................................................................................ 1
1.3 Methodology ........................................................................................................ 2
II. The Chilean Sulfuric Acid Market ........................................................................... 4
2.1 Behavior in 1999-2008........................................................................................... 4
2.2 Leading Producers and Consumers ................................................................... 5
2.3 Production and Consumption in 2008 ................................................................ 7
2.4 The Acid Trade (2001-2008) ................................................................................. 9
III. Sulfuric Acid Balance Estimations (2009-2015) ................................................... 16
3.1 Domestic Balance .............................................................................................. 16
3.2 Regional Balance ............................................................................................... 16
3.3 Estimated SX-EW Production.............................................................................. 17
IV. The Chilean Sulfuric Acid Market: Estimations Through 2015 ............................ 18
4.1 Short-Term (2009-2010) ....................................................................................... 18
4.2 Medium-Term (2011-2013).................................................................................. 19
4.3 Long-Term (2014-2015) ....................................................................................... 20
4.4 National Market Balance: Regional Distribution.............................................. 20
V. The World Market ................................................................................................... 22
5.1 Overview.............................................................................................................. 22
5.2 Sulfuric Acid, Sulfur and Related Prices ............................................................ 22
5.3 The Foreign Sulfuric Acid Supply........................................................................ 25
5.4 The Peruvian Supply............................................................................................ 25
VI. Conclusions ............................................................................................................ 27
i
Executive Summary
The Chilean mining industry is the world’s most intensive sulfuric acid user. SX-EW
copper cathode production accounts for 37 percent of overall Chilean mine copper production and 66 percent of world production. While most demand is met locally by copper smelters, the remainder needs to be imported. Given its
relevance to the nation’s copper mining industry, the Chilean Copper Commission regularly tracks the domestic sulfuric acid market. This edition conveys Cochilco’s perspectives on the issue through 2015.
This report projects the Chilean sulfuric acid market balance under various scenarios, based on data submitted by leading domestic producers and consumers.
1. The Chilean Sulfuric Acid Market, 1999-2008 The report begins with a review of the Chilean market, especially smelter production of sulfuric acid and its use by a thriving industry positioned as the world’s largest producer of SX-EW copper cathodes. As consumption rises well above the domestic production capacity, Chile has become a key world
market player that must deal with a structural deficit. Market behavior over the past decade is summarized in the table below.
Table A: Chilean Sulfuric Acid Production and Apparent Consumption (1999-2008)
(KMT) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Production 3,296 3,352 3,659 3,838 4,480 4,615 5,009 5,027 4,806 4,818
Plus Imports 381 529 559 523 488 340 552 607 1,285 2,399
Minus Exports (133) (83) (2) (74) (162) (150) (481) (131) (124) (84)
Apparent Consumption 3,544 3,797 4,216 4,287 4,806 4,805 5,080 5,503 5,967 7,133 Source: Cochilco Yearbook of Copper and Other Mineral Statistics, 1989-2008.
The report identifies leading producers, notably public-sector smelters, as well as leading consumers, notably copper ore leaching operations on stream since the previous decade plus several major new operations.
This examination reveals an asymmetric market with demand concentrated in the north and production in the center, making sulfuric acid transportation,
handling and storage highly relevant logistical issues.
Meeting increased acid demand required a corresponding rise in imports. In 2008, these stood at nearly 2.4 million tons, an 87 percent increase over 2007
worth US$451 million CIF, in turn a 482 percent increase over the year before. CIF
ii
prices in 2008 averaged US$188 a ton versus US$72.7/ton in 2007. Quarterly
changes in import prices are shown below.
Chart A: Sulfuric Acid Import Prices, CIF Mejillones (Q1 2001-Q4 2008)
Source: Cochilco, based on Customs data.
Export flows, on the other hand, fell to 83,900 TPY with a price average of US$178.2/ton FOB.
2. Estimates For 2009-2015
As explained in the methodology notes,1 the domestic sulfuric acid balance evaluates four scenarios (Baseline, Maximum Production, Maximum
Consumption and Potential). Each is in turn projected over the short, medium and long-terms. Results are shown on the table below.
1 See Section 1.3.
iii
Table B: Domestic Sulfuric Acid Balance, 2009-2015 (KMT)
Short-Term Medium-Term Long-Term
Description 2009 2010 2011 2012 2013 2014 2015
Baseline Production (1) 5,055 5,385 5,742 6,156 6,221 6,255 6,463
Potential Production (2) 0 0 70 200 200 200 700
Maximum Production (3) 5,055 5,385 5,812 6,356 6,421 6,455 7,163 Baseline Consumption (4) (7,428) (7,625) (7,440) (7,252) (7,083) (6,520) (6,202)
Potential Consumption (5) 0 0 (715) (865) (955) (1,165) (1,170)
Maximum Consumption (6) (7,428) (7,625) (8,155) (8,117) (8,038) (7,685) (7,372) Balance Under Each Scenario
Baseline (1-4) (2,374) (2,241) (1,698) (1,096) (862) (265) 261
Maximum Production (3-4) (2,374) (2,241) (1,628) (896) (662) (65) 961
Maximum Consumption (1-6) (2,374) (2,241) (2,413) (1,961) (1,817) (1,430) (909)
Potential (3-6) (2,374) (2,241) (2,343) (1,761) (1,617) (1,230) (209) Source: Cochilco, based on producer and consumer company reports to March 2009.
The likely evolution of the Chilean sulfuric acid market is illustrated in the chart
below.
Chart B: Sulfuric Acid Market Balance By Scenario (2009-2015)
Source: Cochilco, based on producer and consumer company reports.
iv
3. Conclusions Our review of the Chilean sulfuric acid market suggests the following conclusions:
a) Sulfuric Acid and Copper Production SX-EW copper cathode production is expected to reach 2 million TPY in 2008,
peak at 2.15 million TPY in 2010, then begin to slide unless new major projects come on stream. Significantly, the consumption rate (i.e., acid required to produce a ton of
copper cathodes) has expanded from 2.86 tons in 2004 to 3.45 in 2008 and could reach 4.0 by 2015.
b) Acid Supply and Prices in 2008 As noted in previous reports, a severe sulfuric acid shortfall was anticipated for
2008 as a result of rising demand from new large-scale leaching facilities such as Spence, the Escondida Sulfide Leach Project and Gabriela Mistral, plus smaller operations capitalizing on high copper prices.
Increased demand necessitated imports of over 2.3 million tons, a twofold and fourfold increase over 2007 and 2006, respectively. As shown on Table 13, these imports were made under adverse conditions, including a tight world sulfur and
sulfuric acid market in H2 2007 and an all-time price peak in mid-2008. This scenario had a serious operational impact on the Chilean market and
severely taxed its logistics infrastructure. Higher acid prices, coupled with rising consumption, made costs soar.
c) Weaknesses in the Domestic Acid Supply While acid consumption has exploded, domestic production has fallen by 200,000 TPY over the 5 million TPY peak posted in 2005. Although production at
the Chagres Smelter has increased, this has not sufficed to offset steep declines in Codelco and Altonorte production.
This condition should revert starting this year, when a return to 2005 levels is expected. This should be followed in short order by increases at Altonorte and Chagres, then Codelco in the medium term.
d) New Supply From Sulfur Plants
v
Deferment of the Codelco Smelter-Refinery Project opened up the field to sulfur-
burning options, with two major projects now underway. Some smaller-scale initiatives failed to come to fruition.
Noracid -an affiliate of the Ultramar and Belfi groups, also active in Puerto Mejillones- is building a 720,000 TPY plant in this port, with startup slated for early 2011. This facility, intended to serve a group of leading Antofagasta mining
companies, will leverage the synergies offered by their joint terminal, acid storage and loading and offloading infrastructure. It will also generate electricity to be sold through the SING power grid.
Haldeman, for its part, is planning a second plant similar to its 140,000 TPY sulfur burning plant in Sagasca, Tarapacá. As this facility is intended to serve a planned company expansion, it should have no significant market impact if built.
e) Chilean Market Prospects Through 2015
Under a baseline scenario, the Chilean sulfuric acid shortfall should tend to decrease gradually, level off in 2014, then turn around completely in 2015. However, new consumption from potential projects could vastly exceed
production. In this scenario the market would continue to show a deficit, albeit much less strongly than at present.
Leaching projects most likely to materialize include Sulfolix (El Abra), Tres Valles (Vale), and new areas at Codelco Norte and Caserones. Reasonably likely projects include Cerro Dominador’s Diego de Almagro and Codelco Salvador’s
San Antonio Oxides. Prospects under exploration which might materialize after the 2015 cutoff date were not considered in this study.
New production projects are limited to a 10-percent capacity boost by Noracid and to Haldeman’s project, which should have no real market impact. Also, should Codelco choose to go that route, the Ventanas Smelter might be expanded to process more Andina concentrates starting in 2015.
Although Peruvian acid is plentiful in the short term, vigorous copper mining growth patterned after Chile should significantly expand SX-EW operations.
As such, the most likely prospect facing the Chilean sulfuric acid market is continued, albeit less pronounced shortage. While Chile will continue to rely on
imports, Peruvian supplies should take a back seat to central Chile sources and to the Antofagasta sulfur plant, which should go some way to relieving the chronic shortage in this region.
vi
f) Price Prospects Sulfuric acid prices will continue to be dictated by phosphate fertilizer prices, a determinant of sulfur prices. Although fertilizer demand has plunged for now, this
is regarded as no more than a short-term reaction to inflated prices. Analysts will continue to watch agricultural policy changes in China and India.
Should these countries resume plans to stimulate agricultural productivity for both food and biofuel production purposes, prices will be sure to rebound. Analysts will also keep an eye on oil prices, phosphate fertilizer use and biofuel
production. Given the role of Middle Eastern producers in dictating sulfur prices, as long as oil
remains under US$100 a barrel -a price level that discourages biofuel production- the sulfur market’s structural surplus should help keep prices low.
Conversely, should oil prices make substitution attractive, sulfur prices might rise along with demand for fertilizer production, in turn pushing biofuel costs up. Also significant is the growing role of indirect sulfuric acid production from
copper and other smelters. During weak demand cycles, smelter acid may well supplant part of direct production, keeping both sulfur and sulfuric acid prices down.
1
I. Introduction 1.1 Purpose and Contents
This is the 2009 edition in a series of annual reports on the Chilean sulfuric acid market prepared by the Chilean Copper Commission (Cochilco). These reports are published as part of Cochilco’s ongoing examination of metal and industrial
mineral markets and strategic issues impacting the Chilean mining industry. This report reviews significant changes in 2008 in world commodity markets, especially the sulfuric acid market. It also estimates Chilean production and
consumption scenarios going forward. These annual reports seek to provide relevant facts and figures to businesses and
individuals concerned with mining market issues, especially those directly or indirectly involved in the sulfuric acid industry.
Section II provides an overview of the Chilean sulfuric acid market, including key producers and consumers, historical industry data for 1999-2008, and relevant developments through 2008.
Section III estimates sulfuric acid production and consumption and national and regional market balances through 2015, based on data provided by leading mining companies.
Section IV examines these estimates and resultant scenarios in chronological order, including sulfuric acid balance behavior in relevant regions.
Section V places the world sulfur and sulfuric acid markets in context, with emphasis on unprecedented 2007 and 2008 prices and associated impact on
Chile’s import-dependent domestic market. Conclusions are shown on Section VI.
1.2 Explanation Cochilco tracks sulfuric acid issues due to their relevance to the Chilean copper
mining industry, notably producers such as copper smelters and consumers such as sulfide and oxidized ore leaching operations.
In addition to meeting the information needs of the public in general, publicly available information on sulfuric acid issues is key to appropriate decision-making by producers, consumers, traders, logistics service providers, and regulators.
2
1.3 Methodology 1.3.1 Scope This report is concerned with sulfuric acid production and consumption in Chile. Data used was provided by producers and consumers, who were asked to
estimate production and consumption from 2009 through 2015. Their responses were received and tabulated in late 2008 and early 2009. The domestic sulfuric acid balance does not include supplies from foreign
competitors such as Peru, although some details about this market are provided as part of a review of domestic market prospects.
While the broad timeframe used makes it more difficult for respondents to accurately estimate their production and/or consumption profiles and makes more distant projections somewhat tentative, it helps identify leaching operation
decline as well as potential new projects. Data on sulfuric acid imports and exports was culled from public sources, based on Customs data.
1.3.2 Scenarios by Degree of Certainty
The scenarios below are based on the degree of certainty assigned to available data. Projects both existing and under construction are considered highly certain. Less so are projects considered for startup through 2015, which may
materialize partially or never. Scenarios are as follows: a) Baseline: A balance for the period based on annual production and
consumption profiles from operations either existing or under construction. This scenario provides the underpinnings of our projection, since the profiles involved depend only on the evolution of activities underway. Additional, yet less certain scenarios are built upon this foundation.
b) Maximum Production: An intermediate scenario based on factoring in
sulfur roasting plants under consideration but not yet approved. The
balance for each year is calculated based on maximum production and basic consumption profiles. This yields an estimate of available market room under the most adverse conditions, with demand only from existing
operations.
c) Maximum Consumption: An additional intermediate scenario based on factoring in mining projects under consideration but not yet approved. The
3
balance for each year is calculated based on maximum consumption
and basic production profiles. As potential consumption profiles are highly likely to materialize, this scenario yields an estimate of the domestic acid situation under adverse conditions, with supply only from existing plants.
d) Potential: An additional scenario built by factoring in potential production
and consumption profiles from projects under consideration by acid
producers and consumers. While these potential profiles are less likely to materialize, this scenario provides insights into the overall sulfuric acid production and consumption potential in 2009-2015 and helps determine the likelihood of the local acid market moving from shortage to surplus.
1.3.3 Timeframe
The period under review has been segmented into three sections, based on expected market behavior:
a) Short-Term (2009-2010): Reflecting existing operations, this is the nearest, most certain period. Noted for consolidation of the strong consumption profile emerging in 2006, followed by lagging production. Resulting annual balances attest to a rising shortage.
b) Medium-Term (2011-2013): Factors in potential startup of consumer and
some production projects. It helps shed light on their impact but adds
uncertainty to projections. c) Long-Term (2014-2015): While projections for this time period are less
reliable, they provide insights into the impact of leaching operation decline.
4
II. The Chilean Sulfuric Acid Market This Section summarizes Chilean sulfuric acid market behavior over the past 10 years as well as estimated production and consumption through 2015.
2.1 Behavior in 1999-2008
Accounting for most of the rapid growth undergone by the Chilean sulfuric acid market is an expanding copper mining industry, where smelters and SX-EW plants have become key producers and consumers. The chart below illustrates the relative importance of hydrometallurgical copper production in Chile.
Chart 1: Copper Production in Chile, 1999-2008 Source: Cochilco Yearbook of Copper and Other Mineral Statistics 1989-2008.
SX-EW production in the period rose by 600,000 TPY, increasing its share of total mine production from 31 to 37 percent. More refined copper is produced by hydrometallurgical than pyrometallurgical (i.e., smelter and refinery) means
since 2001. Chile is the world’s largest SX-EW producer, with a 66 percent share in 2008 (up 7
percent over 1999), followed by the U.S. and Peru with 17.7 and 5.4 percent, respectively.
Mining growth has resulted in major shifts in the sulfuric acid market. Annual production, consumption, imports and exports are shown on Table 1.
5
Table 1: Chilean Sulfuric Acid Production and Apparent Consumption (1999-2008)
(KMT) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Production 3,296 3,352 3,659 3,838 4,480 4,615 5,009 5,027 4,806 4,818
Plus Imports 381 529 559 523 488 340 552 607 1,285 2,399
Minus Exports (133) (83) (2) (74) (162) (150) (481) (131) (124) (84)
Apparent Consumption 3,544 3,797 4,216 4,287 4,806 4,805 5,080 5,503 5,967 7,133 Source: Cochilco Yearbook of Copper and Other Mineral Statistics, 1989-2008.
2.2 Leading Producers and Consumers 2.2.1 Sulfuric Acid Plants and Projects The table below shows producer location, ownership type and destination of
production (own supply within the region and/or sale to third parties).
Table 2: Leading Sulfuric Acid Producers
Ownership Destination Status Region
Producer Operation or Project Public Private Self Supply Operation Project
I Haldeman-Sagasca X X X Baseline Potential
II Xstrata-Altonorte X X X Baseline
II Codelco-Chuquicamata X X X Baseline
III Codelco-Potrerillos X X X Baseline
III Enami-Paipote X X X Baseline
V Anglo American-Chagres X X X Baseline
V Codelco-Ventanas X X X Baseline
Metro Molymet-Plant Mo X X X Baseline
VI Codelco-Caletones X X X Baseline
Source: Cochilco.
All producers earmark a portion of their output for their own use at related operations. Existing and planned operations are given baseline and potential
status, respectively. In the former category, only Haldeman Mining has a potential project: a second sulfur roasting plant matching the acid production capacity of its Sagasca facility. Section III notes an additional sulfur roasting project contemplated by Ultramar and Belfi affiliate Noracid.
2.2.2 Leading Consumer Projects and Operations Table 3 shows leading consumer location, ownership type and acid origin (own or third-party). Existing operations and planned leaching projects and/or
6
expansions with a consumption potential of 30,000 tons a year and up are given
baseline status. Smaller mining and industrial consumers are also shown. Potential cases include projects in a preliminary stage and therefore less certain
to materialize before the end of the ten-year period under review. These include leached material processing at Gaby, development of Lomas Bayas II adjacent to the existing operation, the Salvador Division’s San Antonio Oxides Project,
Cerro Dominador’s Diego de Almagro Project and development of the hydrometallurgical portion of Pan Pacific Copper’s Caserones Project.
Table 3: Leading Sulfuric Acid Consumers Ownership Source Status
Region
Consumer Public Private Self External Operation Project
XV Quiborax2 X X Baseline
I Haldeman - Sagasca X X Baseline
I BHP - Cerro Colorado X X Baseline
I Collahuasi X X Baseline
I Teck- Quebrada Blanca X X Baseline
II Codelco Norte X X Baseline
II Codelco-Gaby X X Baseline Potential
II Freeport- El Abra X X Baseline Potential
II Antof. Min.- El Tesoro X X Baseline
II BHP - Escondida X X Baseline
II Xstrata-Lomas Bayas X X Baseline Potential
II Milpo - Iván X X Baseline
II Cerro Dominador X X Baseline
II Anglo-Am. -Mantos Bl. X X Baseline
II Mantos de la Luna X X Baseline
II Antof. Min. - Michilla X X Baseline
II BHP- Spence X X Baseline
II Barrick - Zaldívar X X Baseline
III Codelco-Salvador X X Baseline Potential
III Cerro Dom. - D. Almagro X X Potential
III Centenario- Franke X X Baseline
III Enami-Plants X X Baseline
III Punta del Cobre X X Baseline
III Cemin - Dos Amigos X X Baseline
III Anglo-Am. - Manto Verde X X Baseline
III P. P. Copper - Caserones X X Potential
IV Teck - Carmen de And. X X Baseline
V Cemin - A. Catemu X X Baseline
V Anglo-Am. El Soldado X X Baseline
Met Anglo-Am. -Los Bronces X X Baseline
2 Boric acid producer in Arica-Parinacota.
7
VI Codelco-El Teniente X X Baseline
South Wood pulp plants X X Baseline
Source: Cochilco.
2.3 Production and Consumption in 2008
2.3.1 Regional Distribution Shown below is distribution of sulfuric acid production and consumption in 2008:
Table 4: Distribution of Sulfuric Acid Production and Consumption in 2008 (KMT)
Production Consumption3 (Shortfall)
Surplus
Country Total 4,818 100% 7,084 100% (2,266)
Region Arica + Tarapacá
Antofagasta
Atacama
Coquimbo
Valparaíso
Metropolitan
O’Higgins
Other
104
1,978
729
0
822
70
1,115
0
2.2
41.1
15.1
0.0
17.1
1.5
23.1
0.0
936
4,965
719
62
94
116
92
100
13.2
70.1
10.1
0.9
1.3
1.6
1.3
1.4
(832)
(2,987)
10
(62)
728
(46)
1,023
(100)
Supply Type Self
Commercial
2,063
2,755
42.8
57.2
2,063
5,021
29.1
70.9
0
(2,266)
Ownership Public
Private
3,477
1,341
72.2
27.8
1,809
5,275
25.5
74.5
1,668
(3,934)
Source: Cochilco, based on company data.
2.3.2 Production/Consumption Ratios Acid consumption in 2008 stood at 7.1 million tons. Some 6.8 million were used by
copper mining operations to produce 1.97 million tons SX-EW copper cathodes, an average consumption rate of 3.45 tons of acid per ton of copper.
Mining consumption rates range from below 1 to 16.1, depending on geochemistry of ores, soluble copper grades, technology used, and scale of production. If total production is segmented by quintiles4 (394.8 kMT Cu in 2008) significant consumption differences among segments become evident.
3 Estimates based on consumer company reports. May not match apparent consumption in Table 1 due to
inventory changes and bias in data reported. 4 Portion of a frequency distribution containing one fifth of the total sample.
8
Table 5: Sulfuric Acid Consumption by Quintile of Copper Production
Acid Consumption Copper Production Consumption Quintile
kMT Acid % kMT Cu % Ton Acid/Ton Cu
First 680 10.0 394.8 20.0 1.72
Second 965 14.2 394.8 20.0 2.44
Third 1,160 17.1 394.8 20.0 2.94
Fourth 1,497 22.0 394.8 20.0 3.79
Fifth 2,499 36.7 394.8 20.0 6.33
Total 6,801 100.0 1,974.0 100.0 3.45
Source: Cochilco.
The chart below shows consumption rate behavior in leading operations. Sulfuric acid consumption is shown in ascending order.
Chart 2: SX-EW Copper Production by Rate of Sulfuric Acid Consumption (2008)
Source: Cochilco.
The high acid consumption rate in 2008 (3.45 tons) ratifies a growing trend (2.86 tons in 2004, 3.24 in 2006) related to falling leached ore quality as operations cranked up production to capitalize on the price bonanza.
9
Acid production in 2008 stood at 4.82 million tons, including 4.6 million produced
by copper smelters. These facilities produce about 1 ton of sulfuric acid per ton of copper concentrate processed or 2.9-3 tons of acid per ton of refined copper, depending on concentrate type and rate of sulfur gas collection.
2.4 The Acid Trade (2001-2008) As hydrometallurgical copper processing grows, Chile has become a major sulfuric acid trader. In addition to importing large quantities to make up for structural shortages, Chile also exports temporary surpluses.
2.4.1 Imports
Chart 3: Sulfuric Acid Import Prices, CIF Mejillones (Q1 2001-Q4 2008)
Source: Cochilco, based on Customs data.
Chart 3 above shows average sulfuric acid import prices and quarterly highs and lows since 2001. Table 5 below provides additional details.
10
Table 5: Sulfuric Acid Imports (Jan. 2001 – Dec. 2008)
Period Tons US$‘000 CIF5 US$/Ton Avg. US$/Ton
Q1
Q2
Q3
Q4
Total 2001
170,962
178,109
149,320
60,070
558,461
4,518,1
4,883,0
3,815,2
1,651,5
14,867,8
26.4
27.4
25.6
27.5
26.6
20.0 - 35.0
21.0 - 42.2
20.5 - 33.2
20.5 - 35.0
20.0 - 42.2
Q1
Q2
Q3
Q4
Total 2002
178,506
155,300
102,348
86,361
522,515
5,459,5
4,354,5
2,962,3
3,130,9
15,907,3
30.6
28.0
28.9
36.3
30.4
25.0 - 36.8
23.5 - 38.9
26.5 - 39.8
26.4 - 55.3
23.5 - 55.3
Q1
Q2
Q3
Q4
Total 2003
158,962
114,743
107,403
106,713
487,821
6,219,2
3,533,8
3,446,4
3,647,1
16,846,5
39.1
30.8
32.1
34.2
34.5
28.0 - 50.1
15.0 - 40.1
15.0 - 40.5
22.4 - 52.6
15.0 - 52.6
Q1
Q2
Q3
Q4
Total 2004
80,941
76,185
83,154
99,946
340,226
3,154,0
3,202,1
3,362,5
5,648,8
15,367,4
39.0
42.0
40.4
56.5
45.2
20.0 - 52.6
32.2 - 74.7
22.1 - 72.0
22.1 - 78.0
20.0 - 78.0
Q1
Q2
Q3
Q4
Total 2005
179,828
150,573
75,313
146,693
552,407
10,109,9
9,529,5
3,483,9
8,146,9
31,270,2
56.2
63.3
46.3
55.5
56.6
22.1 - 81.0
22.5 - 104.7
22.5 - 74.5
22.5 - 78.2
22.1 - 104.7
Q1
Q2
Q3
Q4
Total 2006
174,993
120,398
135,986
175,491
606,868
10,045,9
7,278,4
7,143,7
10,165,9
34,633,9
57.4
60.5
52.5
57.9
57.1
23.0 - 78.2
23.0 - 83.2
23.0 - 88.2
26.7 - 98.5
23.0 - 98.5
Q1 Q2
Q3
Q4
Total 2007
265,259 300,983
358,409
360,437
1,285,088
20,349,8 17,848,2
24,194,6
31,081,7
93,474,2
76.7 59.3
67.5
86.2
72.7
24.0 - 105.0 25.3 - 122.0
39.0 - 162.6
31.0 - 215.0
24.0 - 215.0
Q1
Q2
Q3
Q4
Total 2008
626,324
556,877
664,851
550,406
2,398,457
109,827,7
86,176,6
160,095,0
94,896,8
450,996,1
175.4
154.7
240.8
172.4
188.0
44.0 - 324.4
38.0 - 367.7
38.0 - 480.0
38.0 - 480.0
38.0 - 480.0
Source: Cochilco, based on Customs data.
Shown below is annual import data by country of origin, including amounts,
global value, and average unit value for each year. The freight and insurance portion illustrates the relevance of logistical factors. Tables 6.1 and 6.2 show figures for 2001-2005 and 2006-2008, respectively.
5 Unit value is CIF for most imports except for Codelco, which uses a C+F variant that excludes insurance.
Does not include sulfuric acid imports for use by laboratories and the explosives industry.
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Table 6.1: Sulfuric Acid Imports by Country of Origin (2001-2005)
Country of Origin / Year
Amount (Tons)
CIF Value (US$‘000)
Average Value (US$/Ton CIF)
F + I (US$/Ton)
Japan
Peru
Germany
Australia U.S.
Mexico
Korea
Philippines
Canada
Total 2001
181,722
168,191
60,912
52,470 36,644
32,911
14,054
11,444
113
558,461
4,209,3
4,664,6
1,654,1
1,479,1 1,152,2
1,056,0
371,7
277,9
2,9
14,867,8
23.2
27.7
27.2
28.2 31.4
32.0
26.4
24.3
25.5
26.6
13.8
13.8
19.1
20.0 20.6
24.4
13.2
12.2
22.0
Japan
Peru
Mexico Sweden
Philippines
Canada
Switzerland
Total 2002
220,034
108,981
82,238 74,488
18,207
10,183
8,383
522,514
5,950,6
3,621,2
3,074,5 2,112,7
582,6
271,9
293,8
15,907,3
27.0
33.1
37.4 28.4
32.0
26.7
35.0
30.2
10.5
13.8
26.6 27.9
25.8
20.0
27.5
Japan
Peru
Sweden
Korea
Australia Spain
Algeria
Total 2003
191,846
105,717
96,899
49,487
25,190 12,637
6,045
487,821
6,846,4
3,248,6
2,763,5
2,461,7
933,7 353,8
238,8
16,846,5
35.7
30.7
28.5
49.7
37.1 28.0
39.5
34.5
3.4
14.2
24.9
30.1
30.1 26.0
12.5
Japan
Peru
Sweden
South Korea
Philippines
Mexico Total 2004
122,618
97,631
78,819
21,988
16,000
3,170 340,226
4,413,5
3,605,6
4,328,7
1,583,1
1,201,5
235,0 15,367,4
36.0
36.9
54.9
72.0
75.1
74.1 45.2
4.4
14.2
37.5
43.5
50.1
37.1
Japan Mexico
Peru
South Korea
Sweden
Bulgaria
Philippines
Total 2005
161,270 150,880
107,412
68,504
41,935
19,024
3,382
552,407
5,617,2 11,071,9
4,362,2
5,181,7
3,018,4
1,764,8
254,0
31,270,2
34.8 73.4
40.6
75.6
72.0
92.8
75.1
56.6
1.7 42.2
15.8
45.4
53.3
66.2
50.1
Source: Cochilco, based on Customs data.
Table 6.2: Sulfuric Acid Imports by Country of Origin (2006-2008)
Country of Origin / Year
Amount (Tons)
CIF Value (US$‘000)
Average Value (US$/Ton CIF)
F + I (US$/Ton)
Mexico
Japan
South Korea
Peru
Germany
Finland
Sweden
Canada Bulgaria
Total 2006
184,012
102,105
96,389
89,615
49,741
31,648
30,697
16,155 6,506
606,868
12,485,3
4,592,9
6,290,9
3,831,0
2,801,4
1,507,9
1,627,0
856,6 640,9
34,633,9
67.9
45.0
65.3
42.7
56.3
47.6
53.0
53.0 98.5
57.1
40.3
2.2
44.6
16.8
48.2
38.3
52.7
52.0 64.2
Peru 499,280 25,812,8 51.7 13.0
12
Japan
South Korea
Philippines
Mexico
Germany
Bulgaria Poland Spain
Sweden
U.S.
Total 2007
286,694
223,178
71,464
51,405
45,305
37,881
20,028 18,352
17,075
14,425
1,285,087
19,243,0
23,025,6
8,764,0
2,683,8
3,240,3
4,076,9
1,622,3 1,892,9
1,699,0
1,413,6
93,474,2
67.1
103.2
122.6
52.2
71.5
107.6
81.0 103.1
99.5
98.0
72.7
41.2
70.0
61.8
19.8
11.0
73.3
56.9 64.3
70.2
48.1
Peru
South Korea
Japan
India
China
Philippines Spain
Mexico
Indonesia
Canada
Sweden
Bulgaria Poland
Egypt Total 2008
683,504
391,376
370,320
335,895
210,482
203,570 51,336
48,877
22,517
21,079
18,673
18,460
13,637
8,732 2,398,458
54,629,0
73,994,2
62,646,7
91,712,7
58,146,1
55,807,9 10,396,7
16,626,9
8,353,1
4,979,5
2,357,9
4,270,2
3,276,7
3,798,4 450,996,0
79.9
189.1
169.2
273.0
276.3
274.1 202.5
340.2
371.0
236.2
126.3
231.3
240.3
435.0 188.0
13.4
84.7
77.2
103.1
90.4
97.0 80.5
50.4
111.7
109.7
77.2
85.4
95.3
140.6
Source: Cochilco, based on Customs data.
Table 7 below shows imports since 2001 by importer, including transaction amounts, value, and domestic market share. The CIF Mejillones6 price is a market
yardstick for sulfuric acid pricing. While importers are led by mining companies and industry traders, Codelco remains a key player.
Table 7: Sulfuric Acid Imports by Importer
Importer / Year Tons US$‘000 CIF US$/Ton Avg.
Share (%)
Interacid 216,507 5,142.2 23.8 38.8
Codelco 147,415 4,106.1 27.9 26.4
Miners 146,638 4,363.1 29.8 26.3
Chemtrade7 47,901 1,256.3 26.2 8.6
Total 2001 558,461 14,867.8 26.6 100.0
Codelco 254,640 6.977.9 27.4 48.7
Miners 138,607 4,507.7 32.5 26.5
Interacid 82,238 3,074.5 37.4 15.7
Chemtrade 47,029 1,347.3 28.6 9.0
Total 2002 522,514 15,907.3 30.4 100.0
Codelco 181,846 6,320.5 34.8 37.3
Miners 110,446 3,125.0 28.3 22.6
Trans Sud 95,245 2,986.8 31.4 19.5
Interacid 84,677 3,921.2 46.3 17.4
Chemtrade 10,472 261.8 25.0 2.1
BCT Chemtrade 5,136 231.1 45.0 1.1
Total 2003 487,822 16,846.5 34.5 100.0
Codelco 112,652 3,889.5 34.5 33.1
6 Mejillones, Antofagasta is the main Chilean port of entry for sulfuric acid imports. 7 In 2003 Chemtrade Chile Ltda. branched off into BCT Chemtrade Ltda. and Comercial Trans Sud Ltda.
13
Trans Sud 90,189 3,687.1 40.9 26.5
Miners 63,402 3,013.4 47.5 18.6
BCT Chemtrade 44,847 2,816.9 62.8 13.2
Interacid 29,136 1,960.5 67.3 8.6
Total 2004 340,226 15,367.4 45.2 100.0
Miners 218,967 15,886.9 72.6 39.6
Codelco 161,270 5,617.2 34.8 29.2
Trans Sud 88,390 3,331.4 37.7 16.0
Interacid 53,669 4,183.8 78.0 9.7
BCT Chemtrade 30,111 2,250.9 74.8 5.5
Total 2005 552,407 31,270.2 56.6 100.0
Miners 207,297 13,073.5 63.1 34.2
Codelco 144,598 7,573.8 52.4 23.8
Interacid 115,934 7,532.5 65.0 19.1
Trans Sud 89,321 3,299.4 36.9 14.7
BCT Chemtrade 49,718 3,154.7 63.5 8.2 Total 2006 606,868 34,633.9 57.1 100.0
Miners 573,990 37,457.7 65.3 44.7
Interacid 212,878 18,473.1 86.8 16.6
Trans Sud 180,557 12,085.0 66.9 14.0
BCT Chemtrade 161,657 15,678.0 97.0 12.6
Codelco 156,005 9,780.3 62.7 12.1
Total 2007 1,285,087 93,474.2 72.7 100.0
Miners 1,266,840 229,451.4 181.1 52.8
Interacid 437,979 103,809.6 237.0 18.3
Trans Sud 287,189 37,719.2 131.3 12.0
Codelco 204,998 38,066.3 185.7 8.5 BCT Chemtrade 201,452 41,949.6 208.2 8.4
Total 2008 2,398,458 450,996.1 188.0 100.0
Source: Cochilco, based on Customs data.
2.4.2 Exports Although Chile has an acknowledged structural deficit, some local producers have standing supply contracts with neighboring countries which they are
required to fulfill. In addition, temporary excess production often leads to surpluses which cannot be stored or sold domestically. Such surpluses are often sold on the spot market under less advantageous conditions.
Shown below is annual distribution by destination plus volume amount, global FOB value and resulting unit value. Tables 8.1 and 8.2 show figures for 2001-2005 and 2006-2008, respectively.
Table 8.1: Sulfuric Acid Exports by Destination (2001-2005)
Destination & Year Tons US$‘000 FOB US$/Ton
Argentina
Bolivia
Total 2001
1,316
550
1,866
44.4
36.4
80.8
33.7
66.2
43.3
Peru Brazil
Bolivia
Total 2002
57,417
10,314
5,949
73,680
1,477.9
350.7
303.4
2,132,0
25.7
34.0
51.0
28.9
14
Brazil
Peru Bolivia
Argentina
Costa Rica
Total 2003
77,351
72,487
10,723
1,740
23
162,324
2,362.1
1,933.8
449.4
47.8
2.5
4,795.6
30.5
26.7
41.9
27.5
110.0
29.5
Peru
Brazil Bolivia
Argentina
Costa Rica
Total 2004
107,926
26,098 13,615
2,394
259
150,292
4,618.8
950.1 772.7
99.6
31.5
6,472.7
42.8
36.4 56.8
41.6
121.6
43.1
U.S.
Peru
Brazil
Cuba
Bolivia
Argentina
Mexico Costa Rica
Total 2005
199,401
180,311
43,692
29,300
12,420
10,633
5,084 52
480,893
1,978.6
10,618.1
378.4
795.0
974.5
612.1
68.6 6.7
15,432.0
9.9
58.9
8.7
27.1
78.5
57.6
13.5 128.8
32.1
Source: Cochilco, based on Customs data.
Table 8.2: Sulfuric Acid Exports by Destination (2006-2008)
Destination & Year Tons US$‘000 FOB US$/Ton
Brazil
Peru
Argentina
Bolivia
Total 2006
55,921
48,192
14,501
12,699
131,313
1,048.6
2,163.9
521.6
954.5
4,688.6
18.8
44.9
36.0
75.2
35.7
Peru
Brazil
Cuba
Bolivia
Argentina
Total 2007
42,028
37,514
20,036
12,627
11,948
124,153
2,083.5
2,276.3
1,247.2
940.7
535.1
7,082.8
49.6
60.7
62.2
74.5
44.8
57.0
U.S.
Cuba
Bolivia
Argentina
Brazil
Peru
Total 2008
33,261
17,812
10,596
9,095
8,149
5,000
83,913
6,269.3
2,986.7
2,588.8
2,304.2
559.1
245.1
14,953.2
188.5
167.7
244.3
253.4
68.6
49.0
178.2
Source: Cochilco, based on Customs data.
Table 9 below shows exports by exporter and share.
15
Table 9: Chilean Sulfuric Acid Exports by Exporter
Exporter / Year Tons US$‘000 FOB US$/Ton Avg. Share (%)
Enami 1,316 44.4 33.7 70.5
Codelco 550 36.4 66.2 29.5
Total 2001 1,866 80.8 43.3 100.0
Interacid 47,593 1,134.0 23.8 64.6
Codelco 26,087 998.0 38.3 35.4
Total 2002 73,680 2,132.0 28.9 100.0
Codelco 84,255 2,420.6 28.7 51.9
Trans Sud 60,550 1,904.3 31.4 37.3
Interacid 15,756 420.2 26.7 9.7
Enami 1,740 47.9 27.5 1.1
Other 23 2.6 113.0 0.0
Total 2003 162,324 4,795.6 29.5 100.0
Interacid 61,569 2,524.4 41.0 41.0
Trans Sud 47,130 1,809.5 38.4 31.4
Codelco 38,938 2,007.8 51.6 25.9
Enami 2,150 81.4 37.9 1.4
Other 503 49.6 98.7 0.3
Total 2004 150,292 6,472.7 43.1 100.0
Codelco 279,500 7,337.1 26.3 58.1
Interacid 101,798 3,824.6 37.6 21.2
Trans Sud 82,954 3,845.9 46.4 17.2
BCT Chemtrade 12,610 124.3 9.9 2.6
Enami 276 10.5 38.0 0.1
Other 3,755 289.7 77.2 0.8
Total 2005 480,893 15,432.1 32.1 100.0
Trans Sud 66,210 2,517.1 38.0 50.4
Codelco 65,103 2,171.5 33.4 49.6
Total 2006 131,313 4,688.6 35.7 100.0
Codelco 72,112 4,373.5 60.6 61.7
Trans Sud 42,028 2,083.5 49.6 29.4
BCT Chemtrade 10,013 625.8 62.5 8.8
Total 2007 124,153 7,082.8 57.0 100.0
Codelco 61,008 11,692.8 191.7 72.7
BCT Chemtrade 17,812 2,986.7 167.7 21.2
Trans Sud 5,001 245.1 49.0 6.0
Wine Industry 92 28.6 310.4 0.1
Total 2008 83,913 14,953.2 178.2 100.0
Source: Cochilco, based on Customs data.
16
III. Sulfuric Acid Balance Estimations (2009-2015) 3.1 Domestic Balance
As explained in the methodology notes,8 the domestic sulfuric acid balance evaluates four scenarios (Baseline, Maximum Production, Maximum Consumption and Potential). Each is in turn projected over the short, medium
and long-terms. Results are shown on the table below.
Table 10: Domestic Sulfuric Acid Balance, 2009-2015 (KMT)
Short-Term Medium-Term Long-Term
Description 2009 2010 2011 2012 2013 2014 2015
Baseline Production (1) 5,055 5,385 5,742 6,156 6,221 6,255 6,463
Potential Production (2) 0 0 70 200 200 200 700
Maximum Production (3) 5,055 5,385 5,812 6,356 6,421 6,455 7,163 Baseline Consumption (4) (7,428) (7,625) (7,440) (7,252) (7,083) (6,520) (6,202)
Potential Consumption (5) 0 0 (715) (865) (955) (1,165) (1,170)
Maximum Consumption (6) (7,428) (7,625) (8,155) (8,117) (8,038) (7,685) (7,372) Balance Under Each Scenario
Baseline (1-4) (2,374) (2,241) (1,698) (1,096) (862) (265) 261
Maximum Production (3-4) (2,374) (2,241) (1,628) (896) (662) (65) 961
Maximum Consumption (1-6) (2,374) (2,241) (2,413) (1,961) (1,817) (1,430) (909)
Potential (3-6) (2,374) (2,241) (2,343) (1,761) (1,617) (1,230) (209) Source: Cochilco, based on producer and consumer company reports to March 2009.
3.2 Regional Balance Acid production and consumption behavior details are provided in regional balances under the maximum scenario.
Table 11 shows individual balances for leading consumer regions plus central and southern Chile (i.e., Coquimbo to Los Ríos). Shown for each region are baseline and potential production and consumption plus the resulting balance
(shortfall or surplus).
8 See Section 1.3.
17
Table 11: Regional Sulfuric Acid Balance in Chile - Potential Scenario for 2009-2015 (KMT)
Short-Term Medium-Term Long-Term Regional Scenarios
2009 2010 2011 2012 2013 2014 2015
A) Arica-Parinacota and Tarapacá
Surplus 110 135 135 135 135 135 135
+ Potential Production 0 0 70 140 140 140 140
- (Baseline Consumption) (743) (909) (792) (647) (645) (599) (582)
- (Potential Consumption) 0 0 (70) (140) (140) (140) (140)
(Shortfall Arica/Tarapacá) (633) (774) (657) (512) (510) (464) (447)
B) Antofagasta
Baseline Production 2,150 2,290 2,635 3,030 3,100 3,110 3,210
+ Potential Production 0 0 0 60 60 60 60
- (Baseline Consumption) (5,260) (5,130) (5,027) (5,235) (5,007) (4,625) (4,609)
- (Potential Consumption) 0 0 (555) (555) (545) (645) (610)
(Shortfall Antofagasta) (3,110) (2,840) (2,947) (2,700) (2,392) (2,100) (1,949)
C) Atacama
Baseline Production 845 845 845 845 845 845 845
+ Potential Production 0 0 0 0 0 0 0
- (Baseline Consumption) (946) (1,099) (1,157) (893) (954) (882) (597)
- (Potential Consumption) 0 0 (60) (120) (220) (330) (370)
(Shortfall Atacama) (101) (254) (372) (168) (329) (367) (122)
D) Coquimbo-Los Ríos
Baseline Production 1,950 2,115 2,127 2,146 2,141 2,165 2,273
+ Potential Production 0 0 0 0 0 0 500
- (Baseline Consumption) (480) (487) (465) (477) (477) (414) (414)
- (Potential Consumption) 0 0 (30) (50) (50) (50) (50)
Surplus 1,470 1,627 1,632 1,618 1,614 1,701 2,309
Source: Cochilco, based on producer and consumer company reports to March 2009.
3.3 Estimated SX-EW Production
To place the sulfuric acid balance in context, the table below shows current estimates for SX-EW copper production, the single-largest sulfuric acid consumer.
Table 12: Expected SX-EW Copper Cathode Production (2009-2015) (KMT)
Short-Term Medium-Term Long-Term
Description 2009 2010 2011 2012 2013 2014 2015
Baseline Production 1,880 1,919 1,751 1,726 1,603 1,396 1,341
New Production 216 235 348 390 445 492 478
Estimated Production 2,096 2,154 2,099 2,116 2,048 1,888 1,819 Source: Investment in the Chilean Copper and Gold Mining Sector - Estimations for 2009-2013 (March 2009).
18
IV. The Chilean Sulfuric Acid Market: Estimations Through 2015
This Section discusses factors impacting the Chilean sulfuric acid market through 2015, especially the international context. Scenarios are reviewed in
chronological order. Chart 4 shows the resulting balance for all four scenarios. Chart lines track
baseline and potential cases while columns track the intermediate maximum production and maximum consumption cases. Details are discussed below.
Chart 4: Sulfuric Acid Market Balance By Scenario (2009-2015)
Source: Cochilco.
4.1 Short-Term (2009-2010) The sulfuric acid deficit for 2009 is expected to stand at a record 2.37 million tons,
slightly above the 2.31 million ton posted in 2008. Estimates of a 2.24-million ton shortfall for 2010 point to the market remaining tight over the short term.
Chile has faced a deficit since 2006 due to startup of large hydrometallurgical projects, increased demand from small- and medium-scale miners driven by high copper prices through Q3 2008, and falling smelter production.
Short-term needs should remain high as existing operations increase consumption and the Gaby mine begins to operate at capacity. That said, declining copper prices are still expected to lead to some degree of reduction.
19
Acid consumption in 2010 is expected
to stand at 7.6 million tons, up from the 7.1 million tons used in 2008. To meet the need, domestic production is
expected to rise from 4.8 million tons in 2008 to 5.4 million in 2010, just as shifts in the world market should make more
acid available. The improved supply should stand mining consumers in good stead.
4.2 Medium-Term (2011-2013) This period is noted for the impact of
potential production and consumption projects. Chart 6 shows the baseline shortfall dropping from 2.24 million tons in 2010 to 0.86 million tons in 2013, as baseline consumption begins to decline and
an additional 660,000 TPY are contributed by the new Noracid Plant in Mejillones. Factoring in demand from potential projects results in consumption hitting an all-time peak of 7.91 million tons in 2011. These projects include the Sagasca
expansion (Tarapacá), Sulfolix (Antofagasta), Diego de Almagro and San Antonio Oxides (Atacama), and Tres Valles (Coquimbo).
The potential supply includes a 10 percent boost in Noracid production
plus the output from the new Haldeman plant in Sagasca. This plant, however, will have no actual
market impact since its output is almost entirely earmarked for a planned expansion.
As such, the actual potential shortfall should drop to 1.38 million tons in 2013. Also shown in the chart are maximum
consumption and production expected in the period.
20
4.3 Long-Term (2014-2015) Baseline consumption continues to decline as baseline production
expands. The net result by 2015 should be a 260,000 TPY surplus that would change the face of the market entirely.
However, potential projects such as Codelco Norte leaching areas and Caserones in Antofagasta add 1.1 million tons in new demand to the
baseline profile. Baseline production is boosted by
potential projects and by an eventual Ventanas expansion, should Codelco move to increase Andina concentrate
processing at this smelter. The net effect of potential projects is an acid shortfall on the order of 200,000 TPY, bringing the overall situation closer to equilibrium.
4.4 National Market Balance: Regional Distribution
Regional distribution in an asymmetric market where demand is concentrated in the north and production in the center requires closer examination. Chart 8 shows the national balance and respective regional balances for the scenario
under review, i.e., the impact of adding potential consumption and production projects to existing operations in each region.
The most salient point in Chart 8 below is a decline in the sulfuric acid shortfall expected in Antofagasta, from a 3.11 million ton peak in 2009 to 1.95 million tons in 2015. Given the relevance of this prime mining region, this figure closely correlates with the national shortfall.
Also significant is the stable surplus in central-southern Chile, which jumps forward in 2015 driven by potential increases in acid production at the Ventanas Smelter.
Atacama, for its part, shows a deficit trending to equilibrium as currently significant consumption from the Salvador Division is replaced only partially by
demand from potential projects.
21
Chart 8: National and Regional Sulfuric Acid Market Balances (Potential Scenario, 2009-2015)
Source: Cochilco.
The particular regional distribution of the Chilean sulfuric acid market has a major logistical impact. This has become quite evident in recent years, as major increases in sulfuric acid flows, both domestic and imported, have stretched the
reception, storage and transportation infrastructure to its limits, a situation that is not expected to improve in the short term.
22
V. The World Market Starting in 2007 the world sulfuric acid market was buffeted by sudden, unforeseen changes, including a very tight spot market and unprecedented
high prices. This situation grew especially acute from July to October 2008, then the pendulum swung sharply in the opposite direction.
This Section is solely intended to outline some of the likely facts accounting for this situation; a more in-depth review would required additional data not yet available.
5.1 Overview9 World sulfuric acid production in 2007 stood at a record 200 million tons, then slid
to 196 million tons in 2008. According to estimations, 71 percent is produced directly (60 percent from sulfur,
10 percent from iron pyrites, 1 percent from other sources) while 29 percent is produced indirectly from sulfur gases emitted by base metal smelting. In 2008, 37 million tons of acid were produced by copper smelters, 14 million tons
by zinc-lead smelters, and some 4 million by nickel and other metals smelting. Significantly, the market share of indirect production, which needs to be sold quickly, has grown 6 percent in the past decade.
Leading sulfuric acid consumption are phosphate fertilizers (64%), industry (28%) and mining (copper: 5%, nickel and uranium: 3%).
5.2 Sulfuric Acid, Sulfur and Related Prices
While most metals have posted significant price gains since 2004, this has not impacted sulfuric acid prices, whose performance depends on the price of sulfur, in turn dependent on the price of phosphate fertilizers, its leading market. Diammonium phosphate (DAP) is a highly representative product whose prices
stand as a yardstick for this range of products. Relatively stable phosphate prices through December 2006 underwent a sea
change in 2007, with unprecedented price gains that impacted both sulfur and sulfuric acid prices. The table below compares leading referential prices for sulfuric acid, sulfur, DAP and copper.
9 Based on a presentation made on 1 April 2009 to a CRU event in Santiago by British Sulphur consultant
Joanne Peacock.
23
Table 13: Sulfuric Acid, Sulfur, Phosphate and Copper Price Comparison
Monthly Prices (US$/Ton) Price Index (Dec. 2006=100)
Sulfuric
Acid Sulfur DAP Copper
Sulfuric Acid
Sulfur DAP Copper
Month FOB
Tampa FOB
Vancouver
FOB Middle
East
FOB Tampa
LME Month FOB
Tampa FOB
Vancouver
FOB Middle
East
FOB Tampa
LME
Jun 06 50 56 62 265 7,198 Jun 06 78.9 100.0 119.2 103.1 107.8
Sep 06 55 56 57 260 7,602 Sep 06 87.7 100.0 109.6 101.2 113.9
Dec 06 63 56 52 257 6,676 Dec 06 100.0 100.0 100.0 100.0 100.0
Mar 07 68 65 84 435 6,452 Mar 07 108.8 116.1 161.5 169.3 96.7
Jun 07 72 65 135 440 7,476 Jun 07 114.0 116.1 259.6 171.2 112.0
Jul 07 72 130 174 425 7,974 Jul 07 114.0 232.1 334.6 165.4 119.4
Aug 07 72 140 202 433 7,514 Aug 07 114.0 250.0 388.5 168.5 112.6
Sep 07 72 180 220 436 7,649 Sep 07 114.0 321.4 423.1 169.6 114.6
Oct 07 72 200 223 450 8,008 Oct 07 114.0 357.1 428.8 175.1 120.0
Nov 07 125 200 240 550 6,967 Nov 07 198.2 357.1 461.5 214.0 104.4
Dec 07 125 300 497 610 6,588 Dec 07 198.2 535.7 955.8 237.4 98.7
Jan 08 220 300 504 765 7,061 Jan 08 350.9 535.7 969.2 297.7 105.8
Feb 08 220 450 620 900 7,888 Feb 08 350.9 803.6 1,192.3 350.2 118.2
Mar 08 220 480 666 1,190 8,439 Mar 08 350.9 857.1 1,280.8 463.0 126.4
Apr 08 220 480 666 1,230 8,685 Apr 08 350.9 857.1 1,280.8 478.6 130.1
May 08 253 660 747 1,200 8,383 May 08 403.5 1,178.6 1,436.5 466.9 125.6
Jun 08 253 660 806 1,160 8,261 Jun 08 403.5 1,178.6 1,550.0 451.4 123.7
Jul 08 474 800 804 1,220 8,414 Jul 08 754.4 1,428.6 1,546.2 474.7 126.0
Aug 08 474 800 760 1,130 7,635 Aug 08 754.4 1,428.6 1,461.5 439.7 114.4
Sep 08 452 665 360 890 6,991 Sep 08 719.3 1,187.5 692.3 346.3 104.7
Oct 08 408 180 223 570 4,926 Oct 08 649.1 321.4 428.8 221.8 73.8
Nov 08 408 65 48 570 3,717 Nov 08 649.1 116.1 92.3 221.8 55.7
Dec 08 110 65 53 395 3,072 Dec 08 175.4 116.1 101.9 153.7 46.0
Jan 09 0 48 45 358 3,221 Jan 09 0.0 85.7 86.5 139.3 48.2
Feb 09 0 40 52 371 3,315 Feb 09 0.0 71.4 100.0 144.4 49.7
Source: Cochilco, with data from SULPHUR (sulfuric acid and sulfur), PENTASUL (DAP) and Cochilco
(copper).
Relative to December 2006, DAP prices (FOB Tampa, Gulf of Mexico) in June
2007, December 2007 and June 2008 rose by 1.7, 2.4, and 4.5 times, respectively. Most of the steep rise was driven by unprecedented phosphate demand from
China and India. Both countries are implementing vast agricultural development programs designed to increase food, and most recently, biofuel production. These programs included subsidized fertilizer costs.
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To sulfur producers, this was a boon. However, Canada and Russia, the world’s
largest sulfur producers and exporters, face logistical issues in moving their vast output from the continental interior to ports of shipment. This is not the case for Middle Eastern oil producers. Their sulfur is obtained in coastal zones, which
enables them to fill orders without delay. These producers, and later their Canadian counterparts, drove sulfur prices up.
Relative to December 2006, Middle Eastern sulfur prices in June 2007, December 2007 and June 2008 rose 2.5, 9.5, and 4.5 times, respectively. Canadian producers reacted in H2 2007. While as of June 2007 their prices had only risen 16 percent, by December 2007 they were 5.3 times higher than the year before
and by June 2008 they were almost 12 times the December 2006 price. As to sulfuric acid, Tampa prices traditionally track the price of Canadian sulfur.
However, in this particular sulfur market, acid prices lagged behind the shifts in the price of its key input. As of June 2007, prices had risen 14 percent, similar to sulfur. By December 2007 they had risen 2 times, as compared to 5.3 times for
Canadian sulfur. By June 2008 the price was 4 times higher than in December 2006, one third of the rise in the price of sulfur. Lower acid prices were due to indirect acid producers, including smelters that
cranked up production to take advantage of high base metal prices. In April 2008 phosphate fertilizer prices hit a record US$1,230/Ton FOB Tampa.
China and India, reeling under the impact of subsidies on the public purse, called a halt. Demand slackened and prices declined. However, sulfur and acid prices kept on rising until peaking in July 2008.
In September 2008 the slow decline turned into a sharp plunge, as the onset of the global financial crisis made oil prices plummet, taking Middle Eastern sulfur
prices with them. The sharp decline in prices calls for a reexamination of sulfur market fundamentals after the serious distortions of the past two years. These point to a
market with a structural surplus, as sulfur comes from the desulfuration process oil and/or natural gas must undergo prior to use as fuel. Most large known oil and gas reserves worldwide are high in sulfur. As such, given its logistical position,
Middle Eastern sulfur is likely to continue to play a key market and pricing role. In addition, oil prices under US$100 a barrel might conceivably discourage
biodiesel production at least in the short term, in turn reducing phosphate fertilizer demand and impacting the sulfur and sulfuric acid markets.
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That said, industrialized countries are likely to continue non-conventional
renewable energy development, including biofuels, for political reasons connected with reducing dependence on foreign oil. If so, the need for higher agricultural productivity will continue to rise, driving demand for phosphates and
other fertilizers. Other than the vagaries of the global economic and financial crisis, the monthly
price comparison in Table 13 shows no special correlation between the copper market and the specifics of the sulfur market. 5.3 The Foreign Sulfuric Acid Supply Unprecedented sulfur and sulfuric acid demand had a direct impact on availability. Spot market shortages became acute, transport vessels ran short
and handling capacity at marine terminals was taxed to the limit. This situation caught the Chilean market, and especially the mining industry, at
peak dependence on foreign supplies. While most of the 2.3 million tons in imports came in under existing contracts, Table 5 shows that at least 20 percent were bought at prices near the peak for
each period. In other words, many consumers had to resort to the spot market under highly
adverse conditions. While Chile still labors under a critical shortage, expected changes in the world
market should give buyers some respite. 5.4 The Peruvian Supply Over the past three years, sulfuric acid imports from Peru have grown apace, from 89,000 TPY in 2006 to 499,000 TPY in 2007 and 683,000 TPY in 2008.10
This merits a review of available sulfuric acid supplies from Peru. However, since it lacks direct access to Peruvian producer and consumer data, Cochilco does not estimate a joint balance for the Chile-Peru region. As such, this review is
based only on available global reports. Peruvian sulfuric acid comes from copper, zinc and lead smelters implementing
new sulfur gas abatement programs. Sulfuric acid production has been rising since 2006 and stands now at some 1.4 million TPY.
10 See Table 6.2, Sulfuric Acid Imports by Country of Origin.
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Peruvian capacity is expected to rise to some 2.2 million TPY in 2010, followed by an additional 20 percent longer-term increase leaving annual production at some 2.6 million TPY.
In Peru, as in Chile, sulfuric acid demand is mostly driven by copper leaching operations. While current consumption is an estimated 800,000 TPY, this is
expected to rise to some 1.4 million TPY after the Tía María facility in southern Peru comes on stream in about three years. Peru projects under review –which may or may not see the light of day- could
required an additional 900,000 TPY starting in 2012. Peruvian supplies available for export could reach some 1.2 million TPY in 2010,
then slide to 700,000 TPY as domestic consumption cranks up. However, if potential projects are factored in, Peru would be unable to match
the steep rise in consumption. Under this scenario, Peruvian supplies available for export should settle at not more than 300,000 TPY within five years.
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VI. Conclusions Our review of the Chilean sulfuric acid market suggests the following conclusions:
6.1 Sulfuric Acid and Copper Production SX-EW copper cathode production is expected to reach 2 million TPY in 2008,
peak at 2.15 million TPY in 2010, then begin to slide unless new major projects come on stream. Significantly, the consumption rate (i.e., acid required to produce a ton of
copper cathodes) has expanded from 2.86 tons in 2004 to 3.45 in 2008 and could reach 4.0 by 2015.
6.2 Acid Supply and Prices in 2008 As noted in previous reports, a severe sulfuric acid shortfall was anticipated for
2008 as a result of rising demand from large-scale leaching facilities and smaller operations capitalizing on high copper prices. Increased demand necessitated imports of over 2.3 million tons, a twofold and
fourfold increase over 2007 and 2006, respectively. As shown on Table 13, these imports were made under adverse conditions, including a tight world sulfur and sulfuric acid market in H2 2007 and an all-time price peak in mid-2008.
This scenario had a serious operational impact on the Chilean market and severely taxed its logistics infrastructure. Higher acid prices, coupled with rising
consumption, made costs soar. 6.3 Weaknesses in the Domestic Acid Supply While acid consumption has exploded, domestic production has fallen by 200,000 TPY over the 5 million TPY peak posted in 2005. Although production at the Chagres Smelter has increased, this has not sufficed to offset steep declines
in Codelco and Altonorte production. This condition should revert starting this year, when a return to 2005 levels is
expected. This should be followed in short order by increases at Altonorte and Chagres, then Codelco in the medium term.
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6.4 New Supply From Sulfur Plants Deferment of the Codelco Smelter-Refinery Project opened up the field to sulfur-burning options, with two major projects now underway. Some smaller-scale
initiatives failed to come to fruition. Noracid -an affiliate of the Ultramar and Belfi groups, also active in Puerto
Mejillones- is building a 720,000 TPY plant in this port, with startup slated for early 2011. This facility, intended to serve a group of leading Antofagasta mining companies, will leverage the synergies offered by their joint terminal, acid storage and loading and offloading infrastructure. It will also generate electricity
to be sold through the SING power grid. Haldeman, for its part, is planning a second plant similar to its 140,000 TPY sulfur
burning plant in Sagasca, Tarapacá. As this facility is intended to serve a planned company expansion, it should have no significant market impact if built.
6.5 Chilean Market Prospects Through 2015 Under a baseline scenario, the Chilean sulfuric acid shortfall should tend to decrease gradually, level off in 2014, then turn around completely in 2015.
However, new consumption from potential projects could vastly exceed production. In this scenario the market would continue to show a deficit, albeit
much less strongly than at present. Leaching projects most likely to materialize include Sulfolix (El Abra), Tres Valles
(Vale), and new areas at Codelco Norte and Caserones. Reasonably likely projects include Cerro Dominador’s Diego de Almagro and Codelco Salvador’s San Antonio Oxides. Prospects under exploration which might materialize after
the 2015 cutoff date were not considered in this study. New production projects are limited to a 10-percent capacity boost by Noracid and to Haldeman’s project, which should have no real market impact. Also,
should Codelco choose to go that route, the Ventanas Smelter might be expanded to process more Andina concentrates starting in 2015.
Although Peruvian acid is plentiful in the short term, vigorous copper mining growth patterned after Chile should significantly expand SX-EW operations.
As such, the most likely prospect facing the Chilean sulfuric acid market is continued, albeit less pronounced shortage. While Chile will continue to rely on imports, Peruvian supplies should take a back seat to central Chile sources and
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to the Antofagasta sulfur plant, which should go some way to relieving the
chronic shortage in this region. 6.6 Price Prospects Sulfuric acid prices will continue to be dictated by phosphate fertilizer prices, a determinant of sulfur prices. Although fertilizer demand has plunged for now, this
is regarded as no more than a short-term reaction to inflated prices. Analysts will continue to watch agricultural policy changes in China and India. Should these countries resume plans to stimulate agricultural productivity for
both food and biofuel production purposes, prices will be sure to rebound. Analysts will also keep an eye on oil prices, phosphate fertilizer use and biofuel
production. Given the role of Middle Eastern producers in dictating sulfur prices, as long as oil remains under US$100 a barrel -a price level that discourages biofuel production- the sulfur market’s structural surplus should help keep prices
low. Conversely, should oil prices make substitution attractive, sulfur prices might rise along with demand for fertilizer production, in turn pushing biofuel costs up.
Also significant is the growing role of indirect sulfuric acid production from copper and other smelters. During weak demand cycles, smelter acid may well
supplant part of direct production, keeping both sulfur and sulfuric acid prices down.
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A Cochilco Research Department Publication Prepared By
Vicente Pérez Vidal
April 2009