FMB Weekly Sulphur Report – 19 February 2009 Week 07

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Koch agrees 80,000 t at $47 pt cfr in China MARKET SUMMARY: Sulphur suppliers/traders are concerned a new squeeze is impending in the sulphur market, with lower cfr prices targeted by Chinese buyers now exacerbated by firming freight rates. Sulphur markets have been slow, with players looking to Q2 for some sort of modest recovery through stronger demand in the phosphate sector. Of late prices in China have been holding in the low-$50’s pt cfr but it has now emerged that Koch has agreed 80,000 t of US sulphur in China at $47 pt cfr, down $5 pt on recent business. Meanwhile freights quoted for China this week have risen to $40 pt ex-Black Sea, $45 pt ex-US Gulf and $16-18 pt ex-Middle East, $13-14 pt ex-Vancouver (SEE FREIGHTS SECTION). The Koch price is now the new target for other Chinese buyers, but with freights so strong suppliers will be resisting strongly. The Indian market is dead (with a plentiful supply of $3 pt merchant acid). Most Middle East activity in the last couple of weeks has been dominated by contract and spot liftings to China, with sizeable spot tonnages also lifted for South Africa and Jordan. This week US supplier Phoschem concluded with IFFCO and IPL a total of 1.25m tonnes DAP for shipment March through April 2010. This adds to the 1.2 million tonnes already finalized in India with PhosAgro. IPL and IFFCO now have a combined total of 2.45m tones DAP under contract for shipment March 2009 through April 2010. FMB’s estimate of Indian DAP import requirements for the 2009-2010 fert year is around 6.4 million tonnes, based on a resumption of the phos acid contracts with its major suppliers. GSFC has re-instated its Q1 2009 phosphoric acid contracts at $760pt cfr net 30 days and OCP has agreed the same price for Feb/March shipments with its customers. This will reduce the reliance on DAP imports but with $760pt cfr equating to around $460pt cfr for imported DAP, it is expected that landed values for DAP will rise, particularly in the context of rising freight levels. The US DAP deal will add around 50,000 tpm to demand for molten sulphur. The resumption of phosphoric acid deliveries to India will also help to boost sulphur consumption especially in North Africa, although with stocks still high buyers have not resumed major contract shipments, preferring instead to pick up bargain cargoes on a spot basis. Higher contract shipments are expected begin in Q2, but many players believe the

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Sulphur/Sulphuric Acid Price Guide (US$ per tonne unless otherwise stated) Sulphur – dry bulk Fob Vancouver Fob Vancouver (Brazil)*** Fob Saudi/UAE/Kuwait Fob Iran (formed) Fob Adnoc posted Feb 09 Fob Black Sea Fob Carib (under 15,000 t) cfr Med+ (under 10,000 t) cfr N Africa (over 20,000 t ) cfr India cfr China

Contract

Spot

36-200 190-200 40-200 35 n.m. 40-45 n.m. n.m. 47-52

36-40 40-45 44-50 -0-10 25-35 25-35 52-55 47-52

Sulphur – molten cfr Tampa/C Fla (l.t.) Q1 09 cfr Benelux (loc refs) Q1 09 Cpt NW Europe Q1 09

-0 55-75 80-100

-0 0-20 -

+ excludes Israel, Egypt and Lebanon ***current off-semester indications in Brazil for Q4/Q1 ++ ‘carriage paid to’ for sulphur delivered by Roadtankcar

Sulphuric Acid Cfr NW Eur (smelters) Q1 09 Cfr Brazil ** indicated prices

€40-75** n.m.

n.m. 0-50**

All rights reserved. FMB Consultants accepts no liability for the content of this report, or for the consequences of any actions taken on the basis of the information provided. No company or individual may use the price information contained herein for commercial purposes without the express permission of the publisher. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means - electronic, mechanical, photocopying, recording or otherwise - without the prior written permission of the Copyright owner. ©2008 - FMB CONSULTANTS Ltd

increase in activity will be modest. In Morocco OCP, having partially restarted Jorf Lasfar, is in discussions with ICEC to resume deliveries ex-Kazakhstan commencing March through to June, but this has not yet been finalized. Adnatco has been in the freight market checking on freights for 3 x 30,000 t Ruwais – Morocco/Tunisia for April-June.

Page 1 – FMB Weekly Sulphur Report 19 February 2009

FMB Sales Review - 19 February 2009 Product

Origin

Sulphuric Australia Acid Japan Sulphur USA UAE Iran Taiwan Germany Iran Sardinia Libya UAE Kazkahstan Kazaksthan Qatar Iran Kuwait Qatar Germany, UAE Spain Iran Iran - lumps Taiwan Taiwan Vanc/Calif

Seller

Buyer

Destn

‘000t

$pt bulk

Shipmt

n.a. n.a. Koch Swiss IPCC Formosa ICEC KHPC Primary Trammo Transfert ICEC Swiss Swiss IPCC Trammo Trammo ICEC Primary IGCC IGCC Formosa Formosa Various

IFFCO IFFCO Chinese byrs Foskor Trader Interacid Reg customers Int’l Petrochem FACT Abu Qir IFFCO Foskor Chinese trader Nantong byrs JPMC JPMC Drury Inds Interacid Chinese trader Fertinal

India India China S Africa China China China Pakistan Egypt Egypt India Egypt India S Africa China China Jordan Jordan Nigeria China China China Mexico

12-19 12 80 44 30 15 25 10 7 12 25 25 30 33 30 25 30 25, 40 4 30 25 15 15 6 x 45

3 cfr 3 cfr 47 cfr High-50’s cfr 50 fob ?? Low-40’s fob Est low-50’s cfr 46 fob 90 days High-20’s cfr Low-30’s cfr 54 cfr Low-30’s cfr 45 cfr high-50’s cfr 54 fob est mid-50’s cfr High-$50’s cfr 68-70 cfr 44 fob 40 fob est low 40’s fob est low-40’s fob 40 fob

Jan-Feb Nov-Dec Mch/April ar Feb Feb Mch Feb Feb Feb Feb Feb Feb Feb Feb Feb Jan Jan Jan/Feb Jan Jan Jan Jan Jan Dec-Mch 09

ICEC shipping Adnoc cargo to JPMC

Sulphur Spot Price Comparison

MMTC/India issues sulphur tender

900

$ per tonne fob buk

800 700 600

Koch sells 80,000 t of US sulphur into China firm at $47 pt cfr; Higher freights eating into netbacks.

Reliance cargo lined up for Longkou, China Kuwaiti Feb cargoes loaded by Transfert and China Oil for China, Trammo lines up March cargo

500 400 300 200

Interacid takes Taiwan tender

100

Jan 2006 Mar May July Sept Nov Jan 2007 Mar May July Sept Nov Jan 2008 Mar May July Sept Nov Jan 2009 Mar

0

fob Vancouver

fob Middle East

cfr India

Four vessels lined up to load 100,000 t in US Gulf in next 30 days European Nickel/Turkey project moves forward

This week’s highlights:Koch sells 80,000 t to China at $47 pt cfr Phoschem-India deal perks up US sulphur demand Indian Phos Acid deals back on again for balance of Q1 Firm freights eating into netbacks Swiss Singapore shipping Ruwais cargo to Foskor adding to earlier Qatar cargo

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NIGC/Iran cargo loaded in Assaluyeh for China

CHINA: The need to dispose of US sulphur has resulted in a new sale by Koch of 80,000 t firm into China at $47 pt cfr, $5 pt below recent business in China. This is now the new target for large consumers, but with freights surging other suppliers are resisting. Shell was offering March tonnes ex-Vancouver at close to $50 pt cfr, and Petrosul has tonnes for sale on a China-bound panamax. Rising freights is now a major factor on new business. Freights quoted for China this week have risen to $40 pt ex-Black Sea, $45 pt ex-US Gulf and $16-18 pt ex-Middle East, $13-14 pt exVancouver.

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Shipments of sulphur into China from the Middle East remain strong (see sections below): This month China Oil has shipped two Saudi cargoes to China (MV Minoan Euro, MV Saga Horizon) following a cargo by SIEC in late Jan (MV Apollo) Three Kuwaiti cargoes have been despatched to China from Shuaiba in the last three weeks by Trammo (MV Siam Star), Transfert (MV Clipper Express) and China Oil (MV Yang Jia Men) A Feb Adnoc cargo has been shipped to China from Ruwais by Transfert (MV Mega Lohari) In Iran a cargo is being loaded in Assaluyeh this week for China (MV Delight) Large-scale domestic phosphate and compound fertilizer producers attended a meeting held on 12 February by the China Phosphate Fertilizer Industry Association to discuss the upcoming export policies and measures. In order to ensure domestic fertilizer supply during the spring planting season, the government decided not to decrease fertilizer export tariffs. A long drought in North China and some areas of Central China has seriously harmed crops, and at the same time, the peak season for fertilizer demand is imminent. In order to ensure farmers can buy fertilizers at lower prices, phosphate fertilizer export tariffs will not be revised, but will stay at 110% during the peak season. TAIWAN: The last Formosa tender for 15,000 t was awarded to Interacid at a price in the low-$40’s pt fob Maliao, equating to low-$50’s pt cfr China. Loading will be made 1-5 March and delivery will be to Nantong. SOUTH AFRICA: It has now emerged that Foskor agreed two cargoes of sulphur with Swiss Singapore at prices understood to be around the mid-high $50’s pt cfr. The first cargo of 32,800 t was despatched from Qatar on a two-port load (Ras Laffan and Messaied) and sailed for Richards Bay on 29 January. Now a second shipment has emerged. The MV Handy V has loaded 44,000 t in Ruwais, UAE and sailed for Foskor/Richards Bay on 8 February. JORDAN: ICEC has despatched 40,000 t this week from Ruwais, UAE on the MV Ellenita for delivery to Aqaba to cover a sale made earlier in the year at close to $70 pt cfr. This follows 25,000 t shipped by ICEC to JPMC exBrake and a Jan cargo of 30,000 t by Trammo ex-Qatar. MOROCCO: With respect to the reports of a resumption of the business between OCP and ICEC regarding TCO/Kazakh tonnes, it has been confirmed this week that talks are ongoing for the March-June period but all details have not yet been finalized. A deal is widely expected to be reached, with OCP having

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resumed partial production at Jorf Lasfar. Last month OCP had price ideas in the mid-$20’s pt cfr. There have been reports that recent discussions for TCO tonnes have been around low-$30’s pt cfr although this has not been confirmed directly. Booming freight ex-Black Sea is now a major issue which has to be addressed. INDIA: The sulphur market remains very quiet, with focus of attention on the strong volumes of sulphuric acid being agreed in India at the $30 pt cfr level. (See SULPHURIC ACID section) Sulphur interest has been raised by MMTC’s new sulphur tender closing 24 February for two parcels of sulphur to be shipped to Vizag in March. First parcel 12,000 t of prilled/granular, second parcel 4,000 t of NIGC/NIOC Iranian crushed lump sulphur. Offers to be valid until 27 February. A freight enquiry has been circulated for the lifting of 27,000 t of Reliance sulphur at Sikka for February delivery to Longkou, China. Last major shipments into India this month have comprised: Transfert’s MV Asha Prestige with 25,033 t for FACT/Cochin sold at $54 pt cfr – arrived 11 February from Ruwais Swiss Singapore’s MV Maha Maru Jose with 30,000 t of TCO sulphur ex-Illychevsk for IFFCO/Paradeep sold at $45 pt cfr arrived 17 February ETA’s MV Myong San is due to arrive in Kandla on 21 February with 3,000 t from Bahrain for Shreeji Overseas Midgulf’s MV Sun Peak arrived in Haldia on 13 Feb with 7600 t ex-Yanbu, Saudi for Teesta PAKISTAN: In Kharg Island, Iran the vessel MV Despina has loaded 10.500 t of KHPC sulphur sold to International Petrochemicals and is expected to arrive on Karachi, Pakistan on 21 February. USA: This week PhosChem confirmed it had reached agreement to supply 1.25 million tonnes of DAP to two large customers in India. Under the terms of the 12month contract, the price will be indexed to market pricing. Shipments will begin in March 2009. The deal equates to around 600,000 t, or 50,000 tpm, of muchneeded sulphur demand. In addition to its 1.25 million t year long DAP contract with India, PhosChem recently sold 100,000 t DAP/MAP to Australia, Central America and Africa. The US molten market is being described as less distressed than earlier in the year. Demand has started to perk up a little in the phosphates sector, and last week Mosaic resumed sulphuric acid production at Uncle Sam. Refinery turnarounds have lowered availability for the moment and more sulphur is being granulated following the start-up of Martin Midstream’s

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new 2000 tpd priller. The new priller was brought fully on-stream at the beginning of February adding to Martin’s two existing units of 2000 tpd and 500 tpd, taking Martin’s total operating capacity to 4,500 tpd.

In Kharg Island the vessel MV Despina has loaded 10.500 t of KHPC sulphur sold to International Petrochemicals and is expected to arrive on Karachi, Pakistan on 21 February.

Four vessels totalling 100,000 t are lined up to load in Beaumont over the next thirty days. Koch is loading 4050,000 t at the end of February and both ICEC and Trammo have vessels to load part cargoes in Beaumont and Faustina for shipment to China. A fourth undisclosed trader has also arranged a cargo to load in both ports. Koch is understood to have sold 80,000 t of US sulphur into China for March/April at $47 pt cfr. Current freight rates for US Gulf-China are quoted at $45 pt.

SAUDI: Aramco has no spare tonnage and liftings continue to move steadily out of Jubail, especially to China at contract prices finalized for Q1 at close to $40 pt fob Jubail. Higher freights and lower cfr price ideas in China are now squeezing marketers of AG sulphur. Freights were quoted this week for AG-North China at $16-17 pt, while a new low price was established in China with Koch’s sale of 80,000 t at $47 pt cfr. .

TURKEY: This week European Nickel announced it has secured the approval of the forestry permit for its Caldag nickel laterite project. European Nickel can now progress construction of the processing plant on completion of a project financing package. Shares were trading up 54% following the news. To date, over 80% of the engineering design work has been completed and $70 million has been spent on engineering design, roads, water, power and long lead items. The company has agreed a three-year, US$16 million sustainable development investment programme in partnership with the local government. This programme includes the planting of a city forest by rehabilitating a river bank in Turgutlu, establishing a local development foundation for building local educational and cultural facilities and the construction of a waste water treatment plant. Based on the updated feasibility study published in April 2006, the Caldag mine is planned to produce 20,400 tpa of nickel in the form of an intermediate mixed hydroxide product over a 14 year life of mine. The project includes a proposed a sulphur-burning sulphuric acid plant which would create a sulphur import demand of around 200,000 tpa. The acid plant will generate its own power and supply surplus power to the Turkish grid. UAE: Despite the drop in the February lifting price to $35 pt fob Ruwais, more Adnoc tonnage is being marketed away from the traditional Indian market. Last three vessels despatched or under loading in Ruwais are for South Africa, China and Jordan: -

-

-

Swiss loaded 44,000 t on the MV Handy V for delivery to Foskor/Richards Bay. The vessel sailed on 8 February. Transfert loaded 31,500 t on the MV Mega Lohari for delivery to China. The vessel sailed on 14 February. ICEC’s vessel MV Ellenita has arrived in Ruwais to load 40,000 t for shipment to JPMC/Jordan.

IRAN: IPCC closed a tender for 30,000 t on 12 February for loading late Feb/early March in BIK. The outcome of the tender is not clear. There are reports that the business was awarded above $50 pt fob, but most traders have dismissed this claim. In Assaluyeh, the vessel MV Delight has arrived to load 33,000 t of NIGC sulphur for delivery to China. The vessel is likely to complete on 25 February.

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This week in Jubail China Oil has loaded 38,000 t on the MV Minoan Euro for delivery to China. The vessel sailed on 13 February. Prior to that China Oil shipped 35,0000 t to China on the MV Saga Horizon, which sailed on 2 February. On 31 January SIEC/Sinochem shipped 36,500 t to China on the MV Apollo. Aramco continues to assess the market prior to the onset of major contract negotiations later in March with Fosfertil/Brazil for Q2/Q3, OCP/Morocco for Q2, and with marketing contract holders for Q2. KUWAIT: The disappearance of the North African market has resulted in virtually all KPC tonnages now being moved to China. -

On 31 Jan Trammo shipped 26,000 t to Nantong on the MV Siam Star.

-

On 8 Feb Transfert shipped 27,000 t from Shuaiba to Qingdao on the MV Clipper Express.

-

On 13 Feb China Oil despatched the MV Yang Jia Men to China.

-

Trammo is in the freight market for a March shipment from Shuaiba to China.

GUATEMALA: Trammo is loading 6,000 t in Aruba for shipment to Puerto Quetzcal.

Sulphuric Acid Market still in the doldrums MARKET SUMMARY: As we have said before, the sulphuric acid market continues to be in oversupply with brimming tanks at many producers and consumers around the world. In general, most traders describe the market as dead and see no relief until April at the earliest. There is still a queue of vessels waiting outside Chilean ports to discharge. Storage of unsold acid has become a pressing problem in many regions.

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CHILE: There continue to be a number of vessels waiting outside the ports to discharge that are building up large demurrage bills as a result. However, some even view part of this as floating storage while tanks in the ports are full.

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About 2.2-2.3 million tones sulphuric acid was imported by Chile and it is a sign of how demand has plunged that the latest estimates expect only 1.3-1.4 million in 2009. UNITED STATES: Fresh demand for imports is still non-existent here too. However there are cargoes still arriving from Europe and the Far East under business contracted back in 2008. Indeed BCT Chemtrade has booked a cargo of 10,000t to load at an unspecified location in Europe for shipment to Beaumont in secondhalf February.

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There is also still the vessel near Tampa that is being used effectively as floating storage. BRAZIL: Again demand is absent. According to some estimates there is unlikely to be any fresh import business until as late as May. NAMIBIA: Trammo has fixed 20,000t from Hamburg, Germany, loading second-half February, for shipment to Walvis Bay under its long-term agreement to deliver to Rossing Uranium. N.W. EUROPE: Little progress in being made with fixing a contract price for cfr N.W Europe in the first quarter or first half 2009. One problem is that some buyers want the outstanding cargoes from 2008’s contract to be wrapped into the new price. In other words not pay the figure agreed previously. Naturally the acid producers are equally reluctant to agree to this.

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PORTUGAL: There is still no decision in the tender closed six weeks ago for 40-50,000t to be delivered over 2009 to Grupo Portucel Soporcel. END

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Page 5 – FMB Weekly Sulphur Report 19 February 2009