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Sulphur Market Outlook

WHAT HAS CHANGED IN 2017?IS IT HERE TO STAY?

November 2017

DR. PETER HARRISSON

HEAD OF

SULPHUR & SULPHURIC ACID ANALYSIS

: +44 207 903 2249

: [email protected]

Legal Notice

This presentation is private and confidential. It must not be disclosed in whole or in part, directly or indirectly or in any other format without the prior written permission of CRU International Limited.

CRU International Limited’s responsibility is solely to its clients and its liability is limited to the amount of the fees actually paid for professional services.

Although reasonable care and diligence has been used in the preparation of this presentation, we do not guarantee the accuracy of any data, assumptions, forecasts or other forward-looking statements.

We accept no liability to third parties, howsoever arising.

For more information please contact CRU Customer ServicesEmail: [email protected] Phone: +44 (0) 20 7903 2146

2

Sulphur analysis at CRU

3

CRU GROUP

Independent analysis, consulting, prices and events across mining, metals and fertilizers

CRU FERTILIZER ANALYSIS

Global team of analysts with specific focus on primary research and client engagement

Wider fertilizer analysis team covers all nutrient areas with analysis, prices and costs

Fertilizer team has 27 analysts based in 7 countries

CRU SULPHUR ANALYSIS


Sulphuric Acid Market Outlook

FERTILIZER WEEK

Weekly and daily price reporting, news, short term analysis

Presentation Overview

4

REVIEW OF 2017

Q3 PRICE RALLY

INFLUENCE OF CHINESE BUYING ON MARKET BALANCE

PRODUCTION/EXPORT PERFORMANCE IN 2017 CAN THE PRICE RALLY CONTINUE?

MARKET OUTLOOK FROM 2018

MEDIUM TERM DEMAND PROSPECTS

REGIONAL OVERVIEW OF SUPPLY EXPECTATIONS

MARKET BALANCE OUTLOOK

HOW WILL THE GLOBAL BALANCE DEVELOP TO 2022?

5

0

50

100

150

200

250

2013 2014 2015 2016 2017

Vancouver FOB spot FOB Middle East spot CFR China CFR India FOB Tampa

Data: CRU

Sulphur prices, 2013-2017Price, US$ /t

2017 – A normal year for prices until Q3

Data – CRU Fertilizer Week

6

-15

-10

-5

0

5

10

15

20

25

0

50

100

150

200

250

2015 2016 2017

w/w price change CFR ChinaData: CRU

Sulphur prices, 2015-2017Price, US$ /t weekly price change, US$ /t

2017 – A normal year for prices until Q3

Data – CRU Fertilizer Week

7

0.0

0.5

1.0

1.5

2.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Chinese Imports - 2015 Chinese Imports - 2016 Chinese Imports - 2017

Q1 Imports2015 - 2.56 Mt2016 - 3.10 Mt2017 - 3.05 Mt

Q2 Imports2015 - 2.74 Mt2016 - 3.47 Mt2017 - 2.44 Mt

Q3 Imports2015 - 3.52 Mt2016 - 2.78 Mt2017 - 3.11 Mt

Q4 Imports2015 - 3.17 Mt2016 - 2.61 Mt

2017 - 2.60 Mt*

Monthly Chinese sulphur imports, 2015-2017China sulphur imports, Mt

Data: CRU, IHS GTA

China imports down 16% y/y in H1 2017, Q3 imports up 11% y/y

Data – CRU, * estimate

Global importers show limited volume growth

8Data – CRU

50

75

100

125

150

Chi

na

Mor

occo

USA

Indi

a

Braz

il

Aust

ralia

Indo

nesi

a

2015 2016 2017Data: CRU

Index of major Importers, 2015-2017production index, Index 2015 = 100

TOTAL IMPORT VOLUME

Annual global increase estimated at only 0.6 Mt in 2017

GROWTH MARKETS

Morocco, USA, Brazil and Indonesia increase imports for phosphate demand

Morocco buys greater share from Middle East as CIS supply tightens

USA increases seaborne imports

DECLINE MARKETS

Chinese and Indian import demand declines as local supply climbs

Australia imports fall due to closure of Ni leaching capacity

Contraction in key exporter supply availability

9Data – CRU

50

75

100

125

150

Can

ada

USA

Rus

sia

Kaza

khst

an

UAE

Saud

iAr

abia

Japa

n/S

Kore

a

2015 2016 2017Data: CRU

Index of major exporters, 2015-2017production index, Index 2015 = 100

CANADA/USA Export decline focussed in Q2/Q3

Very limited stock drawdown in 2017

RUSSIA

Production stable but local demand increases cut export volume

KAZAKHSTAN

Increase in sales due to Tengiz with Kashagan due in 2018

MIDDLE EAST

Stable production but limited growth in exports

JAPAN/SOUTH KOREA

Drop in exports from 2016 has tightened availability in Chinese market

10

0

1

2

3

2013 2014 2015 2016 2017Supply Demand Trade

Data: CRU

Sulphur market indicators, y/y changey/y change, Mt

Demand growing faster than supply in 2017

Data – CRU


11

REVIEW OF 2017

Q3 PRICE RALLY








12

Demand growth focussed in few industriesSulphur demand increase by country to 2022demand, Mt

Data – CRU

13

Majority of consumption increases in three countriesSulphur demand increase by country to 2022demand, Mt

Data – CRU

PHOSPHATEGrowth from capacity expansion

CHINASubstitution from pyrites to

sulphur and growth in industrial demand

RUSSIAImproved domestic demand

and currency benefit

AUSTRALIALoss of nickel

leaching operation

14

Production growth is past the peak

4.1%3.7%

3.1%

2.4%

1.8%

2.5%

1.4%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

-1.0

-

1.0

2.0

3.0

4.0

2016 2017 2018 2019 2020 2021 2022

East Asia Middle East CIS Americas Other y-o-y % change

Data - CRU

Annual sulphur production growthProduction growth, Mt growth rate, %

Data – CRU

Canada production weak and stock drawdown limited in Q3 2017

15Data – CRU

SULPHUR FROM OIL SANDS

Syncrude production down 18% y/y

Other oil sands production up 45% y/y

Sector production is flat in 2017

0.0

0.1

0.2

0.3

0.4

0.5

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17

Syncrude Other Oil Sands Alberta Gas BC Gas

Canada sulphur production, 2016-2017production, Mt

SULPHUR FROM GAS

Alberta gas sector down 3% y/y

BC gas down 57% y/y

BC production has declined from 0.6 Mt in 2015, 0.35 Mt in 2016 to only 0.15 Mt in 2017

Regional demand expected to decline further to 2022

16

SULPHUR FROM GAS

Decline in Alberta expected to continue

Production 3% y/y for y-t-Q3 17

US Gas declines in PADD 3 following plant closure in 2016

Data – CRU, USGS, AER, Company reports

8.3 8.4 8.4 8.4 8.4 8.3 8.2

2.5 2.6 3.0 3.1 3.1 3.1 3.1

-

2.0

4.0

6.0

8.0

10.0

12.0

16 17 18 19 20 21 22USA - Oil Canada - Oil/Oil Sands

Data: CRU

North Americas supply from oil/oil sandsproduction, Mt

OIL REFINING

US refining supply continues to grow

Increases focussed in PADD 3 Harvey cut production growth in Q3

Syncrude production down by 18% y/y but…

Oil sands supply still increasing with rebound growth in 2018

0.8 0.7 0.6 0.6 0.6 0.6 0.5

2.1 1.9 2.0 2.1 1.9 1.8 1.7

- 0.5 1.0 1.5 2.0 2.5 3.0

16 17 18 19 20 21 22USA - Gas Canada - Gas

Data: CRU

North America supply from gasproduction, Mt

CIS production growth is in remote regions

NORILSK

KADYM

GALKYNYSH

ASTRAKHAN

KASHAGANTENGIZ

RUSSIA

Decline in gas-based supply offset by growth in refining (17-19) and Norilsk (2020)Total supply growth (17-22) = 0.1 Mt Stock increase ~ 0 Mt/y up to 2020

KAZAKHSTAN

Production up in 2017 from Tengiz and Kashagan exports in 2018 Total supply growth (17-22) = 1.0 Mt Stock increase ~ 0 Mt/y

TURKMENISTAN

Production well below capacity Supply to increased by 0.4 Mt in 2017 then 0.3 Mt in 2018Total supply growth (17-22) = 0.57 Mt Stock increase ~ 0.7 Mt/y to 2019

UZBEKISTAN

Kadym due to start in 2019 No exports, all balance added to stockSupply growth (17-22) = 0.19 Mt Stock increase ~ 0.4 Mt/y

17Data – CRU

Middle East Sulphur production forecast

18

0.0 0.5 1.0 1.5 2.0

Others

UAE

Iran

Qatar

Kuwait

SaudiArabia

Gas Oil

Middle East sulphur supply growth, 16-22production, Mt

Data: CRU

SAUDI ARABIA

Wasit increases in 2017-18, Jazan in 2020 and Al Fadhili 2021

KUWAIT

Shuaiba closed in 2017 with Clean Fuels Project upgrades due in 2018.

QATAR

Growth is tied to Barzan. Start date remains uncertain, major volume likely delayed to 2019

IRAN

Final phases of South Pars commissioning with Total/CNPC JV due in 2022

UAE

Shah expansion forecast for start in 2022

China supply outlook

GAS PRODUCTION

Puguang operating down on historical levels

Production optimised at Yuanba

Chuangdongbei Phase I operating but Phase II only in 2021

19Data – CRU

0

1

2

3

4

5

10 11 12 13 14 15 16 17 18 19 20 21 22North/North East/North West East South/Central South West

China – Oil-based supply by regionproduction, Mt

Data: CRU

OIL REFINING

Refinery start ups in 2017

Yunnan refinery (0.24 Mt) Huizhou refinery (0.22 Mt)

Project pipeline is limited beyond 2019

0

1

2

3

10 11 12 13 14 15 16 17 18 19 20 21 22Puguang Yuanba CDB (Phase I, II) Other

Data: CRU

China – Gas-based supply by operationproduction, Mt


20

REVIEW OF 2017

Q3 PRICE RALLY








21

Market balance peaks in 2019

-1.05

-0.12

0.56

0.15

0.780.89

0.670.50

0.35

-1.5

-1.0

-0.5

0.0

0.5

1.0

2014 2015 2016 2017 2018 2019 2020 2021 2022

Sulphur market indicators, y/y changey/y change, Mt

Data: CRU

Data – CRU

22

RECENT MARKET TRENDS

Global market tightness driven by short term factors. Fundamentals do not support continuation of tightness

Recovery in supply and slowing Chinese demand expected to trigger rebalancing

SUPPLY/DEMAND OUTLOOK

Demand volume growth is strong although pricing remains weak in fertilizers to 2019

Metals demand has limited growth or decline as projects remain out of the pipeline

Production rebound expected in North America

New supply focussed in Middle East and CIS

OUTLOOK FOR GLOBAL MARKET BALANCE

Tightened balance trend in 2017 expected to reverse in 2018

Conclusions

Data – CRU

Sulphur analysis at CRU

23

CRU GROUP

Independent analysis, consulting, prices and events across mining, metals and fertilizers

CRU FERTILIZER ANALYSIS

Global team of analysts with specific focus on primary research and client engagement

Wider fertilizer analysis team covers all nutrient areas with analysis, prices and costs

Fertilizer team has 27 analysts based in 7 countries

CRU SULPHUR ANALYSIS


Sulphuric Acid Market Outlook

FERTILIZER WEEK

Weekly and daily price reporting, news, short term analysis

sulphur market outlook - firt · sulphur analysis at cru 3 cru group independent analysis,...

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