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1 Jerry d’Aquin Con-Sul, Inc. [email protected] 406.837.2005 Fertilizer Outlook and Technology Conference Savannah, GA 11/17/10 SULFUR OUTLOOK
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Jerry d’AquinCon-Sul, Inc.
Fertilizer Outlook and Technology ConferenceSavannah, GA
11/17/10
SULFUROUTLOOK
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CON-SUL, INC.
• Consulting in all commercial aspects of Sulfur
• Founded - 1987 when Agrico sold to Freeport• Entered fertilizers – 1971; Sulfur -- 1981• Do not maintain detailed global project data base• Provide interpretative approach based on experience• North American Quarterly Sulfur Review integrates
commercial, agricultural and sulfur perspectives
• Member, The Sulphur Institute
“SULFUR -- AN ADVANTAGED ELEMENT”
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IS THAT SULFUR?
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OUTLINE
• Why so volatile – supply, demand & price?
• Global Balance Estimates 2008-2015
• US Supply/Demand Fluctuations 2008-2010
• 2011 US 1H Outlook/2H Guesstimate
• 2012 Outlook Commentary
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HISTORIC PRICINGTampa/Central Florida Contract Price Average
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RECENT PRICINGTampa/Central Florida Contract Price Average
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Courtesy:Martin MLP
SOLID SULFUR:Going … Going… or Coming -----?
FORMED (SOLID) SULFUR EXPORTS/IMPORTSGULF COAST 2008 2009 2010e
EXPORTS 360MT 1,478MT 600MTIMPORTS 100MT 0 400MT
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OUTLINE
• Why so volatile – supply, demand & price?
• Global Balance Estimates 2008-2015
• US Supply/Demand Fluctuations 2008-2010
• 2011 US 1H Outlook/2H Guesstimate
• Conclusions
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VOLATILITYLIMITED ACCESSIBLE STORAGE
GONE: Alberta “Foothills Blocks”Saudi Arabian Blocks Galveston Block (1MMT)Kazakh and Russian Blocks Declining
S & D NO LONGER SOLVED BY HUGE, EASILY ACCESSIBLE, CANADIAN INVENTORY
In early 1980s North America had close to 25 million tons of sulfur in easily accessible Blocks. 12million remain, 9 million not accessible
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9MMT -- A LACK OF LOGISTICSPhoto Toronto Globe and Mail and Edward Burtynsky
9MM+T on Blocks in NE Canada have no reclamation or logistical infrastructure. 300MT to 1MMT added annually.
GAS/OIL SAND – SULFUR OUTPUT/INVENTORY
MILLION METRIC TONS
02468
101214161820
1980 1996 2007 1980 1996 2007
gas outputos outputgas inventoryos inventorytot inventory
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POOR INFRASTRUCTURE
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VOLATILITY (cont.)INSUFFICIENT INFRASTRUCTURE
– Russia/Kazakh volume to Black Sea down 10-20% in Winter
– Oil Sand output can not be formed on-site.Very little sold at Vancouver
– Additional rail shipments limited bytruck/bridge/rail infrastructure, demand stability
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VOLATILITY (cont.)SURGES IN CANADA-US TRANSPORT
– 30 day round trip from Central Canada to US users, 2.4 million tons/year shipments (200,000 tons permonth), means 100,000T are always “in-transit”
– When users shut down suddenly, 100,000+T is not unloaded on arrival. Rail yards fill up.
– Refineries must still get rid of sulfur or curtail
– Prices collapse, exports surge and sulfur to landfills
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VOLATILITY (cont.)ERRATIC DEMAND
– US phosphate fertilizer producers gave no warning of in January 2001 and 2008-9 shutdowns
– Chinese buyers repeatedly shift purchases from Vancouver, Arab Gulf and US Gulf to lower price
– The change in this October’s USDA Outlook roiled the fertilizer industry. Their frequent corrections harm agribusiness
– You may recall the surge in DAP and Sulfur following China’s unexpected October ’09 purchase of DAP
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VOLATILITY (cont.)A CRITICAL RAW MATERIAL
– For phosphate fertilizers -- FOOD– For ammonium sulfate -- FOOD– For sulfur fertilizers – FOOD– For innumerable chemicals -- hi value products – For rubber making – essential industry– For refinery operations – essential industry– For metals leaching – capital intensive industry
WHEN SULPHUR IS NEEDEDUSERS PAY ALMOST ANY PRICE
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GLOBAL OUTLOOK
• NO ONE REALLY KNOWS
• Mid-East and Caspian continue slipping
• US Refineries and gas lower
• Canadian sour gas down Oil Sands reconfiguration
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The Sulphur Market Balance, 1995-2015
2011-2015: Average annual surplus 2.7 MMt. Apparent stock build 13.3 MMt.
MIKE KITTO – CRU SULPHUR 2010 Conference, Prague, 11/2/10
19-2
0
2
4
6
8
10
20092010
20112012
20132014
2015
Rio - 2011Moscow - 2010
WORLD SULPHUR BALANCEIFA PIT Meetings
Source: Fertecon Research Centre (Million Tonnes)
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U.S. SULFUR -- Conflicts
• THE US MARKET IS NEVER LONG, but CAN OVERFLOW, or be REALLY SHORT
• Supply– Sour feedstocks, Refinery and Coker runs– Expansions, Logistics, Imports, Inventory
• Demand– Exports, Fertilizer, Economy, Inventory
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PLEASE DO NOT EXPORT!
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US SULFUR SUPPLY(without West Coast exports)
2007 2008 2009 2010e-4
-2
0
2
4
6
8
10
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-0.4 -0.4 -1.5 -0.6
Prod
uctio
n (M
MT)
Gas
Refinery
Molten
Solid
Gulf
Production
Imports
Exports
10.8 11.3 9.4 10.8
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US SULFUR OUTLOOK -- 2011 (without West Coast exports)
2009 2010e 1Ho 2Hg 2011o
-12-10
-8-6-4-202468
1012
ImportsProductionExportsTOTALConsumption BALANCE
9.510.4 10.7
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US SULPHUR OUTLOOK -- 2011 B (without West Coast exports)
2009 2010e 1Ho 2Hg 2011o
-12-10
-8-6-4-202468
1012
ImportsProductionExportsTOTALConsumption BALANCE
9.510.4 10.159.710.6
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PRICING
Tampa/Central Florida Contract Price Average
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OIL SANDSCRITICAL SOURCE of ENERGY and SULFUR
2009 Alberta 1,650,000T***US 1,270,000T 2,920,000
2015-18* Alberta 2,450,000TUS 3,000,000T 5,450,000
2020-25** Alberta 3,220,000TUS 4,000,000T 7,220,000
* CSI estimate. Requires new project construction ** Unlikely in 2020; *** NB: 2009 gas derived output in Alberta was 3.9MMT
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Applause!
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Jerry d’AquinCon-Sul, Inc.
Fertilizer Outlook and Technology Conference
Savannah, GA11/17/10
THANK YOU
