Sulphur Market Outlook - PDF Free Download

Sulphur Market Outlook Meena Chauhan Head of Sulphur and Sulphuric Acid Integer Research The Fertilizer Institute Outlook and Technology conference Fort Lauderdale, Florida

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Sulphur market overview

Sulphur: changing market sentiment from by product to yellow gold

Sulphur prices historically remained below US$100/tonne across major benchmarks, but the commodity bubble in 2007/2008 changed this US$/tonne 900 Average Middle East sulphur prices, 2003 2016 800 Middle East FOB 700 600 500 400 300 Prices started increasing in 2007, as supply tightened and downstream markets were also buoyed 200 100 0 Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Source: Integer, ICIS

Recent trends in global sulphur pricing US$/tonne 190 180 170 160 150 140 130 120 110 100 90 80 70 60 Sulphur prices, September 2014 October 2016 China CFR Middle East FOB Vancouver FOB spot Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Sulphur quarterly average prices (US$ per tonne) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Δ%YoY Q3 China CFR 168 153 177 151 150 131 99 87 79 47% Middle East FOB 161 140 172 144 144 124 97 80 73 49% Vancouver FOB spot 155 146 169 137 143 120 96 82 74 48% Source: Integer, ICIS

Recent market developments Europe/FSU Consolidation in the chemicals sector Erosion of production in West Europe Kazakhstan project progress Americas Fort McMurray wildfires US sulphur production rebound Mosaic s melter in Tampa Brazilian import demand easing Cuba sulphuric acid plant Middle East, Africa & Asia Climbing inventories in China Barzan/Qatar progress and delays Indian sugar season Morocco processed phosphates expansion Source: Integer

Supply

The rise in Middle East sulphur production has materialised in 2016, to bring the region to the top global ranking Million tonnes Sulphur supply by region, 2015 2016 70 65 60 55 50 45 40 35 30 25 20 15 1.3 2.5 +6.1% 63.4 59.8 1.3 2.3 Oceania 2.3 2.6 3.9 Africa 3.9 South East Asia 10.7 Central Europe 10.3 Latin America South Asia 11.3 West Europe 10.3 East Asia FSU North America 13.9 14.3 Middle East 10 5 0 13.4 2015 15.8 2016 Source: Integer

Gas based sulphur production has continued to grow through the year, forecast to represent over 50% of global output Million tonnes 65 60 55 50 45 40 35 30 25 20 15 0.9 2.3 63.4 2.6 3.9 10.7 11.3 13.9 1.3 Oceania Africa South East Asia Central Europe Latin America South Asia West Europe East Asia FSU North America Middle East Global Sulphur Production, 2016 Other 5.0% 43.4% 51.6% Oil based sulphur Gas based sulphur Global sulphur production by type (%) 2012 2013 2014 2015 Oil based 45 45 45 45 Gas based 49 49 49 49 Other 6 6 6 6 10 5 15.8 0 2016 Source: Integer

What does the low oil price environment mean for the sulphur industry? US$/bbl 120 110 100 90 80 70 60 50 40 30 20 10 0 +56.3% Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Brent crude oil price, June 2014 October 2016 Source: Integer, Bloomberg Brent crude prices have been rising since the start of 2016, aiding a more stable outlook but downward pressure remains

Sulphur production in the Midwest and Gulf Coast continues to recover, leading to a net increase in US sulphur output 000 tonnes USA: Total sulphur production by PADD (1 5), for H1 2015 vs H1 2016 661 7 714 4 654 710 952 917 279 269 H1 2015 H1 2016 PADD 2: Midwest 673 648 H1 2015 H1 2016 2,624 194 2,747 157 110 7 90 7 PADD 4+5: Rocky Mountain/West Coast 2,430 2,590 103 83 H1 2015 H1 2016 Sulphur from Natural Gas Sulphur from Petroleum and Coke H1 2015 H1 2016 PADD 3: Gulf Coast PADD 1: East Coast Source: Integer, USGS

As many oil sands projects have become unfeasible in the low oil price environment, the outlook for Canadian energy has shifted Million bbl/d 6.5 Canadian crude oil production forecast, 2012 2030 6.0 5.5 Extra growth anticipated in 2014 forecast Pentanes/Condensate Eastern Canada Conventional Light and Medium Conventional Heavy Oil sands (operating + in construction) 1.1 5.0 4.5 4.0 3.5 0.1 0.3 0.6 0.3 5.0 3.0 2.5 2.0 3.7 1.5 1.0 0.5 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: Integer, CAPP (June 2016)

Canadian gas production is expected to continue to decrease, leading to a net decline in sulphur output for North America in the outlook Million tonnes Canadian sulphur production, 2011 2015 7 6 5 4 6.3 0.6 2.0 6.0 0.6 2.0 Oil Oilsands Gas 5.9 0.6 5.6 5.4 0.6 0.6 2.1 2.1 2.1 Limited growth from the oilsands sector Depletion of wells and challenging economics 3 Impact on sulphur exports from Vancouver Utilization of long term sulphur storage 2 3.7 3.5 3.3 3.0 2.8 Increase in forming facilities 1 0 2011 2012 2013 2014 2015 Source: Integer

Trade: changing dynamics

China remains a central focus for sulphur trade Million tonnes Annual Chinese sulphur imports, 2007 9M 2016 13 12 11 10 9 9.6 8.4 12.2 9.5 11.2 10.5 10.6 10.2 11.9 8.8 +6.7% 9.4 8 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan Sept 2015 Jan Sept 2016 Source: Integer, GTIS

China supply sources continue to shift through 2016. Saudi Arabia remains the number one supplier while molten sulphur supply from Japan and South Korea increased by over 30% Million tonnes China monthly sulphur imports, January 2015 September 2016 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 1.1 0.8 0.7 1.1 0.8 0.9 1.4 1.1 1.2 0.7 1.3 1.2 1.1 1.2 0.9 1.1 1.2 1.3 0.9 1.0 0.9 Rest of the World India Canada Japan South Korea Turkmenistan Kazakhstan Qatar Iran UAE Saudi Arabia 0.1 0.0 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Source: Integer, GTIS

Moroccan sulphur imports have grown through the year as new processed phosphates capacity has been brought online Million tonnes 0.6 Rest of the World United States 0.5 Saudi Arabia 0.4 0.36 0.30 0.30 0.3 Spain Poland UAE 0.42 0.31 Russia 0.45 Morocco monthly sulphur imports, January August 2015 vs 2016 0.55 0.46 0.44 0.43 0.42 0.42 0.35 0.34 0.46 0.43 Imports from the UAE have increased 48% Tonnes from Poland have also increased, up by 23% Shipments from the US have increased significantly, up by 63% 0.2 Russian imports have dropped by 32% 27% drop in trade from Kuwait 0.1 83% drop from Saudi Arabia. Volumes from Europe have also been declining 0.0 Jan 15 Jan 16 Feb 15 Feb 16 Mar 15 Mar 16 Apr 15 Apr 16 May 15 May 16 Jun 15 Jun 16 Jul 15 Jul 16 Aug 15 Aug 16 Source: Integer, GTIS

We expect the US share of Canadian sulphur trade to decline in the outlook Sulphur exports from Canada, 2015 Canada 30% United States Mexico 10% China 20% Brazil Chile 5% 1% Australia 20% Source: Integer, Port Metro

Vancouver exports have improved following the production disruption earlier in the year. Exports to China have gained ground through 2016 000 tonnes Vancouver monthly sulphur exports, January August 2016 2,000 +4.5% 1,800 1,600 1,400 1,200 1,000 800 600 400 69 80 1,710 214 113 120 491 48 33 1,787 6 24 38 47 36 58 97 107 109 110 135 454 Vietnam Guatemala New Zealand USA Morocco Brazil Israel Indonesia New Caledonia Mexico Chile Cuba Australia China Despite the disruption to oilsands production in Q2 2016 due to the Fort McMurray wildfires, sulphur exports out of Vancouver have firmed 200 541 566 0 Jan Aug 2015 Jan Aug 2016 Source: Integer, Port Metro, Company Sources

Demand

Sulphur demand is set to grow by over 2% year on year in 2016, led by developments in Africa Million tonnes Sulphur demand by region, 2015 2016 +2.4% 65 60 55 50 45 40 35 30 1.3 3.1 60.4 3.6 3.7 4.5 4.8 8.4 1.7 1.3 1.7 61.8 3.2 3.6 3.8 4.7 4.8 9.3 1.3 1.3 Central Europe Oceania Southeast Asia Middle East West Europe South Asia Latin America FSU Africa 25 20 10.0 10.0 North America East Asia 15 10 18.0 18.1 5 0 2015 2016 Source: Integer

Integer forecasts around 4 million tonnes of sulphur demand will emerge over the next ten years in the nonfertilizer sector 000 tonnes Net sulphur non fertilizer demand growth between 2016 and 2026, split by region 4,037 East Asia, led by China, and the FSU, led by Kazakhstan show the largest growth over the forecast period 1,738 Non fertilizer demand for sulphur is expected to decrease in Central Europe 1,102 404 335-220 48 66 71 79 174 240 Central Europe West Europe Latin America Middle East South East Asia Oceania Africa South Asia North America FSU East Asia Net addition 2026 from 2016 Source: Integer

Global sulphur balance

The market remains largely balanced in our upside scenario, while the base case surplus hovers around 3 4 million tonnes through the medium term forecast period Million tonnes Global sulphur supply/demand balance, 2015 2026 4 4 Base case scenario Slow growth scenario 3 3 2 2 2 1 1 1 1 1 0 2015 2016 2020 2026 Source: Integer

Conclusions

Key factors influencing long term sulphur market trends Utilization of long term sulphur storage Investment in energy sector shifts in oil prices to impact Development in processed phosphates markets End user ability to switch between sulphur and sulphuric acid Metals markets and commodity pricing for non fertilizer demand Continued rise of new Middle East supply Domestic sulphur production in China Source: Integer

Thank you for your attention Any questions? Meena Chauhan Head of Sulphur and Sulphuric Acid Meena.Chauhan@integer research.com +44 (0) 207 193 3990 All data in the presentation is taken from Integer s Sulphur Market Dynamics Service