Argus North American Sulphur
and Sulphuric Acid
Formerly Argus FMB North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
Summary
Market snapshot
The sulphur market was quiet on the west coast, with prices
rolling over in Vancouver and California. The US Gulf spot
range ticked up on market sentiment and recent activity to
Brazil.
Sulphur, formed
$/t
Timing
5 Jan
Prior
week
Year
ago
±
108-112
US Gulf fob
Prompt
70-75
68-72
3
US Gulf fob
4Q16
67-69
67-69
0 34
105-110
West coast fob
Prompt
85-87
85-87
0 34
118-123
Vancouver fob
Prompt
87-91
87-91
0 34
110-120
Timing
Prior
5 Jan
quarter
Tampa del
4Q16
69.5569.55
65.0065.00
t
110.00110.00
„„ Negotiations begin for the first quarter Tampa sulphur
settlement.
Lower Atlantic del
4Q16
54.5584.55
50.0080.00
t
95.00125.00
Gulf coast ex-refinery
4Q16
29.5569.55
25.0065.00
t
70.00110.00
„„ North American balance drops in October as production
down, exports up.
Midwest ex-refinery
4Q16
24.5544.55
20.0040.00
t
60.0085.00
Timing
5 Jan
Prior
week
Sulphuric acid vessel prices remain in the $30-38/t cfr range,
with no new indications and little demand heard for vessels.
The domestic market is balanced-to-long.
HIGHLIGHTS THIS WEEK
Sulphur, molten
$/lt
Vancouver fob $/t
Tampa del $/lt
200
Year
ago
±
Sulphuric acid
Sulphur
China cfr $/t
Brazil cfr $/t
t
Year
ago
±
US cfr vessel import $/t
Prompt
30-38
30-38
0 34
35-48
Low Atlantic del $/st
4Q16
72-100
72-100
0 34
85-119
US Gulf del $/st
4Q16
67-90
67-90
0 34
89-125
Midwest del $/st
4Q16
67-90
67-90
0 34
89-125
5 Jan
Prior
week
±
Freight rates
150
hhh
100
50
8 Oct 15
10 Mar 16
4 Aug 16
5 Jan 17
Year
ago
Vancouver-China sulphur
14-16
15-17
-1
u
10-12
US Gulf-Brazil sulphur
19-22
19-23
-1
u
14-15
NWE-USGC sulphuric acid
20-25
20-25
0 34
35-39
Med-USGC sulphuric acid
25-35
25-35
0 34
40-45
Related markets
5 Jan Prior week
Sweet-sour crude spread $/bl
-4
-4
2.51
2.51
0.00 34
Ethanol Brazil $/m³
536.50
536.50
0.00 34
Ethanol Chicago ¢/USG
162.75
174.40 -11.65
Tampa DAP $/st
317.50
317.50
0.00 34
Corn $/bushel
357.19
350.85
6.34
Copper $/lb
View the methodology used to assess sulphur and sulphuric acid
prices at www.argusmedia.com/methodology. Your feedback is
always welcome at [email protected]
Copyright © 2017 Argus Media group
±
0
u
u
t
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
North American sulphur balance
Sulphur
Vancouver prices were unchanged at $87-91/t fob. Chinese
prices have plateaued and end-users are pushing for values
under $100/t cfr, keeping a ceiling on Vancouver levels.
The Spectra Pine River facility in British Columbia continues to produce at less than 100pc capacity. The Heartland
sulphur terminal in central Alberta is understood to have
broken ground, but construction is still in the early stages.
The US west coast was flat again this week at $85-87/t fob
with no new indications from the region. The supply situation was last heard to be tight going into 2017, with suppliers
claiming the next business would be around $90/t fob.
The US Gulf spot range has moved up to $70-75/t fob on the
most recent indications and market sentiment. A vessel from
the region loaded 37,000t this week for shipment to Brazil,
but it is unclear whether it is contract or spot.
Negotiations have begun for the first quarter Tampa sulphur
settlement between suppliers and buyers Mosaic and PotashCorp. Suppliers are heard pushing for a $7-10/lt increase,
based on the current disparity between Vancouver and Gulf
Coast pricing.
Domestically, the Midwest is balanced while some length is
seen in the Gulf Coast. The west coast is tight for export but
domestic buyers are heard to be covered.
Brazil's buy-side has reported securing 80pc of its required
290,000t to cover first quarter demand. Cargoes have been
secured in the $91-93/t cfr Santos range.
With freight between the US Gulf and Brazil estimated at
Sulphur, sulphuric acid and DAP price comparison
Sulphur cfr Tampa $/lt
Sulphur acid cfr US $/t
DAP fob Tampa $/t
200
600
150
500
hhh
100
400
50
0
17 Jul 14
300
14 May 15
10 Mar 16
Copyright © 2017 Argus Media group
5 Jan 17
’000t
Jan-Oct Jan-Oct
Oct 16
16
15
Change
Production
US natural gas processing
54
686
816
US crude refining
633
6,830
6,490
5.2%
Total US production
687
7,520
7,300
3.0%
Canada natural gas processing
190
1,822
2,196
-17.0%
Canada oil sands
143
1,483
1,700
-12.8%
Total Canada production
Total North American Production
-15.9%
334
3,305
3,896
-15.2%
1,021
10,825
11,196
-3.3%
Trade
Vancouver exports
255
2,248
2,292
-1.9%
West coast exports
106
708
639
10.8%
US Gulf exports
101
985
719
37.0%
1
12
9
33.3%
256
2,260
2,301
-1.8%
0
73
175
-58.3%
-55.0%
Total US exports
Total North American Exports
Mexico imports
6
9
20
Other vessel imports (non-Canada)
Venezuela imports
49
129
161
-19.9%
Total North American Imports
55
211
356
-40.7%
Balance
820
8,776
9,251
-5.1%
— US Geological Survey, AER, BC Natural Gas & Oil Statistics,
Argus and customs data
$19-22/t this indicates a US Gulf fob range of high-$60s/t to
low-$70s/t for the quarter.
North American sulphur balance
The North American sulphur balance was 613,000t in October 2016, down from 797,000t in September. The year-todate balance totals 7.1mn t through October, down by 10pc
from the corresponding period in 2015.
Overall North American production is down 3pc at 10.8mn
t, as decreases in Canada have outweighed the small rise in
US production. US production was down by 5pc year-overyear at 687,000t in October, but year-to-date US production
through October was still up by 3pc from the corresponding
period in 2015 at 7.5mn t. Canadian production was estimated at 334,000t in October 2016, down from 380,000t in
October 2015, and year-to-date production has fallen off by
15pc to 3.3mn t through October.
North American exports increased 8pc to 4mn t, as US volumes continued to pace ahead in 2016 of 2015 and exports
out of Vancouver recover from the wildfires in the spring.
US exports almost doubled to 208,000t in October 2016 from
106,000t in October 2015. Vancouver exports were up 23pc
year on year at 255,000t in October 2016.
North American imports included some offshore activity in
October, with 49,000t coming in by vessel to Tampa, Florida,
from Russia. Import volumes are down 41pc at 211,000t
through October.
Page 2 of 10
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
%
Sulphur content by Padd
Padd 2
Padd 3
US
PADD 1
1.6
’000t
US sulphur production by Padd
PADD 2
PADD 3
PADD 4 & 5
US
900
750
1.2
600
0.8
450
300
0.4
150
0.0
Jan 15
Apr 15
Jul 15
Oct 15
Jan 16
Apr 16
Oct 16
— EIA
0
Jan 15
Apr 15
Jul 15
Oct 15
Jan 16
Apr 16
Jul 16
Oct 16
— US Geological Survey
’000t
Canada sulphur production
Natural gas
Jul 16
from Russia's Gazprom. Moroccan imports up by 5pc yearover-year to 4.2mn t for January-October 2016.
Oil sands
250
200
„„ Kazahkstan's exports down by 33pc year on year for
January-November 2016, totaling 1.74mn t.
150
100
Phosphates
50
0
Jan 15
Apr 15
Jul 15
Oct 15
Jan 16
Apr 16
Jul 16
Oct 16
— Alberta Energy Regulator, British Columbia Natural Gas & Oil Statistics
US sulphur content by Padd
The weighted average of sulphur content in US crude oil
dropped to 1.38pc in October 2016 from 1.41pc in September. Sulphur content in the Midwest dropped to 1.43pc in
October from 1.47pc in September, and in the Gulf Coast it
dropped to 1.47pc from 1.5pc. Content stayed flat on the
west coast at 1.21pc.
International highlights
„„ Chinese trade quiet this week, with offers as high as the
mid-$100s/t cfr but end-users report concluding at $95100/t cfr.
„„ Saudi Arabia's Aramco Trading announces $2/t decrease
from December to $90/t Jubail for its January lifting price
and Qatar Petroleum, formerly Tasweeq, sets is January
price down $4/t from last month to $88/t fob Ras Laffan/
Mesaieed. Adnoc increases its January price by $4/t from
December at $92/t fob Ruwais, applicable to the Indian
subcontinent.
„„ North African buyers yet to confirm any conclusions for
first quarter contract cargo, will not receive any tonnes
Copyright © 2017 Argus Media group
DAP barge prices started the new year on a high note by
extending the streak of rising barge values for a third consecutive week to $305-308/st fob Nola, spurred by higher
domestic sales.
Market participants are optimistic that DAP barges will continue to climb as a result of slightly tighter global supplies
and increased domestic spring demand.
The DAP Tampa price was solidified at the $320/t fob this
week. There were no new exports reported this week. Mosaic reported tight availability for January shipment.
Sulphuric acid
The US spot vessel import range remains at $30-38/t cfr with
no new activity. Sentiment is in the mid/high-$30s/t cfr and
market participants doubt there is supply available in the
low-$30s/t cfr, but no demand is heard for spot material.
Domestically, no tightness is seen with little regional differentiation. The west coast is seen as balanced with some
length elsewhere in the market.
The NorFalco terminal in Savannah, Georgia, is expected to
start-up in early-January and was understood to be bringing
in volume around that time. It has not been confirmed if it
has started up as of yet.
Page 3 of 10
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
North American sulphuric acid shutdowns/curtailments
Company
Location
Shutdown/curtailment
Start date
Estimated monthly Comments
production t/month
Length
90,000
Will shut down one of two furnaces, total production cut uncertain. Supplies Chemtrade.
Vale
Canada - Sudbury, Ontario
Mid-2017
Glencore/NorFalco
Sudbury, ON, Rouyn-Noranda, QC,
Valleyfield, QC and Belledune, NB
Jan-17
3.5-4 weeks
at each
150,000
Kennecott
Bingham Canyon, Utah
May-17
One month
100,000 Planned maintenance
Veolia
Burnside, Louisiana
Oct/Nov-18 21-24 days
Southern Co subsidiary Mississippi Power’s Kemper County
coal gasification plant is also expected to be fully operational this month. The facility will have an annual capacity
of 150,000 st/yr of byproduct sulphuric acid to be marketed
by Martin.
International highlights
„„ Brazil cfr prices rise to $40-49/t cfr, Petrobras awards
16,000t tender for January delivery.
„„ Northwest Europe prices up to $3-12/t fob on limit spot
supply for export. First quarter discussions ongoing, some
already agreed on a rollover.
„„ Prices in North Africa steady in the low-$20s/t cfr, several
vessels booked for first quarter deliveries from northwest
Europe.
„„ Chilean prices unchanged at $35-40/t cfr, production issues resolved at two smelters.
Copper
US copper cathode premiums were unchanged in the first
week of 2017 as cathode dealers scrambled to drum up business in a lackluster spot market.
Argus assessed grade A cathode premiums at 5-5.5¢/lb
delivered midwest consumer on 4 January, unchanged since
the middle of October. Most expect the lack of interest to
continue next week as mills renew operations after holiday
shutdowns and their limited needs are filled by annual contract material.
The Comex copper price for the most active contract closed
at $2.5565/lb basis March, up from $2.5005/lb a week earlier. Copper rose as the dollar edged lower against a basket
of currencies, making it cheaper for holders of other currencies to buy the dollar-denominated metal. Chinese plans to
invest another 800bn yuan ($115bn) in its railway sector for a
second year also helped push copper higher.
Copyright © 2017 Argus Media group
Planned maintenance of around a month expected at each facility
50,000 Scheduled planned maintenance
Ethanol
US ethanol output rose to an all-time high, while inventories
were unchanged for the week ending 30 December, according to the Energy Information Administration (EIA). US ethanol inventories and production both declined for the week
ending 23 December.
US ethanol production climbed by about 15,000 b/d to
1.043mn b/d, breaking the previous record of 1.04mn b/d set
during the week ending 9 December. Midcontinent production matched its all-time high after increasing by about
5,000 b/d to 955,000 b/d, accounting for more than 91.5pc
of the US total.
Total US ethanol inventories held steady at about 18.7mn bl.
Supplies in the midcontinent remained at a four-month high
after rising by about 200,000 bl to 6.82mn bl. The Atlantic
coast saw a supply draw of about 100,000 bl to reach a fiveweek low of 6.2mn bl.
Ethanol export fixtures in January are starting to surface.
The US Gulf coast to Brazil route has about 37,600t booked
on four fixtures, while there are two fixtures on the books
from Texas City to Peru for a total of about 19,000m³.
At the same time, imports from Brazil saw renewed activity
with two early-January fixtures on the books for 16,600t.
Gasoline demand reached an 11-month low after decreasing
by about 813,000 b/d to 8.465mn b/d, while ethanol blending
also fell to an 11-month low after declining by about 90,000
b/d to 845,000 b/d.
No ethanol imports were reported for the 18th and 19th
straight week.
For the week ending 23 December, total US ethanol inventories declined by about 400,000 bl to about 18.7mn bl. The
Gulf coast region settled at a 57-week low after drawing
about 300,000 bl to 2.94mn bl. Supplies in the midcontinent
Page 4 of 10
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
reached a four-month high after rising by about 200,000 bl
to 6.62mn bl.
US ethanol production declined by about 8,000 b/d from
the previous week to 1.028mn b/d. Midcontinent production
increased by about 3,000 b/d to 950,000 b/d, accounting for
more than 92.4pc of the US total.
%
Refinery operable utilization
Padd 2 MW
Padd 3 USG
US
105
95
85
75
Feedstock
65
Aug 15
US refinery utilization increased slightly to 92pc the week
ending 30 December from 91pc the previous week. Rates
in the Midwest were flat at 94pc from the preceding week,
while the Gulf Coast was flat at 95pc. West coast rates
increased to 86pc from 80pc. US refiners processed about
16.7mn b/d that week, up by 132,000 b/d from the previous
week.
The premium of LLS to Mars increased to $4.25/bl on 5 January from $3.75/bl on 20 December from the last publication.
Light Louisiana Sweet (LLS) was flat from the last publication
at a premium of $1.50/bl to WTI. Mars traded at a discount
of $2.75/bl to WTI on 5 January, down from -$2.25/bl to WTI
on 20 December. The January light sweet crude futures contract was assessed at $52.91/bl on 5 January, up by $0.25/bl
from 20 December.
US crude stocks fell by 7.1mn bl to 479mn bl last week amid
a sharp drop in imports and higher refinery runs, according
to the Energy Information Administration (EIA).
The decline was larger than market expectations of a draw
between 2mn-4mn bl. But market impact will likely be offset
by large builds in product inventories.
Crude imports tumbled by 984,000 b/d to average 7.2mn b/d
$/bl
LLS/Mars USGC crude spread
Nov 15
Feb 16
May 16
Sep 16
Dec 16
— EIA
in the week ended 30 December. Over the last four weeks,
imports averaged 7.8mn b/d, or 0.5pc above the same period last year.
Stocks at Cushing, Oklahoma, rose by 1.1mn bl to 67.5mn bl,
nearing a record high.
Crude exports last week averaged 686,000 b/d, up by 59,000
b/d from the previous week.
The US Gulf coast saw the largest decline in crude stocks,
falling by 7.1mn bl while the east coast saw a drop of 1.2mn
bl. The two regions offset builds in other areas.
US crude production rose by just 4,000 b/d to stay at about
8.8mn b/d.
Domestic crude output has been easing this year as producers have sharply cut back on drilling, but the rig count has
been rising in recent months amid higher commodity prices.
The rig count increased by five last week to 658, according
to Baker Hughes. The total is up by 254 since late May.
$/mmBtu
Henry Hub day-ahead
4
7
6
3
5
2
4
3
5 Jan
5 Apr
5 Jul
Copyright © 2017 Argus Media group
4 Oct
3 Jan
1
5 Jan
Page 5 of 10
5 Apr
5 Jul
4 Oct
3 Jan
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
California refiners closed out 2016 with the highest CARBOB
production of the year as rates climbed at the end of the
year, according to the California Energy Commission.
Refiners in the state increased crude throughputs to 1.7mn
b/d, a 13pc increase from the previous week and 1pc higher
than the same week of 2015. Rates remained 3pc lower than
the ten-year average for the week.
It was the largest week-to-week increase in crude throughputs since July 2014, when rates increased by almost
229,000 b/d. Crude in storage increased by 6pc to 16.6mn bl.
California CARBOB production climbed to its highest rate of
the year following a 10pc increase from the previous week
to 1.1mn b/d. That output was 20pc higher than the same
week of 2015 and 12pc higher than the ten-year average.
CARBOB in storage increased by 4pc to 5.8mn bl, or 6pc
higher than the same week last year.
Non-California gasoline also increased, by 34pc from the previous week, to bring total gasoline production in the state to
1.2mn b/d.
California ultra-low sulphur diesel (ULSD) production
increased by 28pc from the previous week to 265,143 b/d.
Production was higher by 3pc than the ten-year average.
Stockpiles of the fuel increased by 11pc to 2.2mn bl, still
23pc lower than the same week last year.
Crude throughputs at refineries in the state fell in the week
ended 23 December by 2pc to 1.5mn b/d, continuing to trail
both year ago and ten-year average rates for the week by
roughly 15pc. Crude inventories in the state fell by 9pc from
the previous week to 15.6mn bl.
The drop pulled down CARBOB gasoline production by 5pc to
982,000 b/d, according to the commission. CARBOB inventories increased by 1pc from the previous week to 5.6mn bl.
California ultra-low sulphur diesel also fell, lower by 1pc to
207,000 b/d. Inventories of the fuel were flat at 2mn bl.
Eastern Canadian refineries lifted national crude throughputs higher the week ending 20 December, according to
the National Energy Board (NEB). Crude rates at refineries
nationwide that week increased by 5.2pc to 1.6mn b/d, according to the board. Processing remained 6.8pc lower than
the same week last year and 6pc lower than the five year
average.
Refinery utilization increased by 4.1 percentage points to
82pc, its highest level in nearly a month. Quebec and eastern Canadian refineries reported a 16pc increase in rates, to
762,388 b/d. It was the highest volume in the region since
August, according to the board. Crude processing in Ontario,
which the board tracks separately, was flat at 347,009 b/d.
Western refiners cut throughputs by 4.9pc to 484,756 b/d,
according to the board. The decline halted three consecutive weeks of increases. Western facilities were running 16pc
lower than the same week last year, according to the board.
Operations updates
East coast (Padd 1)
PADD 1C: Lower Atlantic/southeast
PADD 2: Midwest
PADD 3: Gulf coast
PADD 4: Rocky Mountain
PADD 5: West coast
Copyright © 2017 Argus Media group
Philadelphia Energy Solutions restarted several units the
week ending 30 December after a "steam emergency" shut
process equipment at its 330,000 b/d refinery in Philadelphia, Pennsylvania. The steam loss required the 26 December shutdown of an alkylation unit in the Point Breeze plant
and a cumene unit in the Girard Point end of the facility,
according to a filing to the city health department. The company shut four unidentified Girard Point units the next day.
Philadelphia Energy Solutions restarted three of the Girard
Point units on 28 December, according to the filing. The
company does not comment on refinery operations.
Midcontinent (Padd 2)
Union workers ratified a new four-year contract on 3 January
at Western Refining's 102,000 b/d refinery in St Paul Park,
Minnesota. Teamsters Local 120 approved a new contract
Page 6 of 10
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
proposed last week after members authorized a strike at
the refinery. The new contract will expire at the end of
2020. The union represents 185 members at the refinery,
which supplies Western's network of 284 company-owned or
franchised SuperAmerica stores as well as other stations in
the upper Midwest. US independent refiner Tesoro plans to
acquire Western in the first half of this year, pending regulatory approval.
Gulf coast (Padd 3)
A sulphur recovery unit malfunctioned on 26 December at
Flint Hills Resources' 260,000 b/d refinery in Corpus Christi,
Texas. The refiner reported a malfunction in equipment
associated with the unit increased emissions that would
continue for an estimated 24 hours, according to a filing to
state environmental regulators. Refiners typically operate
multiple sulphur recovery units, which assist in reducing the
sulphur content of both refined products and gas used in the
refining process.
West coast (Padd 4 and 5)
A tank farm malfunction released a naphtha/sulphur mixture
that increased emissions on 4 January at PBF Energy's
155,000 b/d refinery in Torrance, California. The release
began shortly before noon, according to the filing.
Pasadena Refining reported emissions at its 100,000 b/d
refinery in Pasadena, Texas, on 4 January after a fluid
catalytic cracking (FCC) unit was repaired. The refinery will
follow startup procedures for the FCC unit to minimize emissions, according to a filing with the Texas Commission on
Environmental Quality. Emissions were diverted to a flare,
the sulphur recovery unit incinerator stack, electrostatic
precipitator stack and seal pot stack beginning at 2am on 4
January, and are expected to continue through 2am ET on
7 January. Pasadena Refining reported emissions of carbon
monoxide, nitrogen oxides, butane, propane, ethylene and
other hydrocarbons and petrochemicals.
Industry news
PBF plans maintenance in first half of 2017
Planned maintenance in every US region but the midcontinent will cut PBF Energy's refinery throughputs in the first
half of 2017. The refiner plans up to 55 days of turnaround
work on a fluid catalytic cracking and alkylation unit beginning late in the first quarter at its 190,000 b/d refinery in
Delaware City, Delaware.
PBF will also work on a crude unit at its 190,000 b/d refinery
in Chalmette, Louisiana, during the first quarter. That maintenance will take up to 45 days.
Extensive work was also planned for the second quarter
at PBF's 155,000 b/d refinery in Torrance, California. The
refiner plans turnarounds lasting up to 55 days on a hydrocracker, hydrogen plant, crude and coker units. Estimated
crude throughputs for all refineries this year will average
795,000 b/d to 845,000 b/d, or up to 95pc of crude capacity.
US crude output rises in October: EIA
US crude output moved higher in October, boosted by
increases in Alaska, North Dakota and the offshore Gulf of
Mexico.
Domestic output in October rose by 232,000 b/d or 2.7pc
Copyright © 2017 Argus Media group
to 8.8mn b/d, according to recent data from the US Energy
Information Administration (EIA).
Production in the offshore Gulf of Mexico increased by
5.6pc to 1.59mn b/d while output in Alaska rose by 9.5pc to
495,000 b/d. Production in North Dakota, home of the bulk
of the Bakken shale, climbed by 7.5pc in October to bounce
back above 1mn b/d, according to the EIA data, which is
based on a methodology which includes a direct survey of oil
producers in 15 states.
State officials in North Dakota on 13 December reported
a similar rise of 7.4pc in October which they attributed to
higher production in previously restricted wells because of
higher prices. The state's crude output had dropped below
1mn b/d in August for the first time since March 2014.
North Dakota's output is not likely to stay above 1mn b/d
because of harsh winter conditions that make it difficult
and expensive to use hydraulic fracturing to drill new wells,
state officials said. Texas, the top producing state, saw a
more modest increase in October, according to the EIA.
Production in Texas rose by 0.7pc to 3.18mn b/d while production in New Mexico increased by 1.8pc to 410,000 b/d.
Page 7 of 10
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
The rise in Texas and New Mexico reflects increasing activity in the Permian basin, where the rig count has moved up
sharply in recent months. Producers have focused on the
Permian because of lower extraction costs and increased
takeaway capacity.
Total domestic fertilizer usage may take a small step backward in 2017 because of an expected drop in corn acreage,
but phosphate demand could be shielded by an expected
2mn-acre rise in projected soybean area, according to the
US Department of Agriculture.
The drilling rig count in the Permian last week was 264,
up by 130 since mid-May, according to oil services provider
Baker Hughes. The EIA report shows that production in some
states including Texas, Oklahoma and North Dakota might
be "on the verge" of returning to growth, said analysts with
Barclays Commodities Research.
Mosaic's phosphate production has been steadily increasing
since the end of its 400,000t curtailment in the first quarter
of 2016. As of the end of the third quarter, production had
gone from 75pc (2.2mn t/quarter) to 84pc (2.5mn t/quarter), with the company's fourth quarter guidance calling for
production to climb to 85pc of capacity. Mosaic forecast that
global phosphate shipments in 2017 will climb to a record
high 68mn t, with increased shipments to both Latin America
and Oceania.
US phosphate demand set for spring revival
Limited US phosphate inventories after a strong fall season
could set the stage for a recovery from multi-year lows
ahead of the 2017 planting season.
US phosphate demand could be strong this spring after
increased exports and a strong fall application period combined to clear out domestic warehouse bins and limit winter
carryover inventory.
A 32pc year-over-year increase in US phosphate exports
during the fertilizer year-to-date July-October, and a 12pc
decline in US DAP/MAP production from July-September,
have left closing stocks heading in to October below 17-year
lows, according to the Fertilizer Institute (TFI).
The arrival of a confirmed 354,000t of import DAP/MAP from
August-October limited upward price movement.
Nola DAP barge prices slipped into a steady decline since
peaking in August, dropping by $34/st to a seven-year low
near $290/st fob Nola. But prices now show signs of stabilizing as sellers have yet to accept bids in the $280s/st fob Nola
and forward paper prices show slight appreciation. Forward
prices have been largely range bound because of the estimated 170,000t of import tonnage expected to arrive in late
December and early January.
The outlook for domestic phosphate usage in 2017 is slightly
mixed as increased net cash farm income for corn and
soybean growers is partially offset by a drop in total planted
acres.
The record high yields from the 2016 corn and soybean harvests helped improve farmer income for the year by offsetting the low selling price on both crops. As a result, more
farmers should be financially secure enough to purchase the
nutrients needed to replenish the soil.
Copyright © 2017 Argus Media group
Domestic producers could also receive price support from
international market activity limiting US imports early in
2017. The global phosphates market is watching China,
where producers are set to consider a proposed curtailment
plan that could cut production rates by up to 50pc because
of low prices. The Indian government's decision to roll over
the nutrient-based subsidy has already stimulated demand
within the country. The reemergence of Indian demand
combined with limited Chinese output could set the stage
for higher global prices.
Delek, Alon agree to merger terms
Delek plans to expand a logistics presence in the Permian
basin and could sell California or Louisiana refineries following its planned acquisition of Alon USA, chief executive Uzi
Yemin said today. The planned combination, expected in the
first half this year, should create a 300,000 b/d refiner with
an outsized presence and platform to grow in the Permian
basin, Yemin said.
Delek will acquire the remaining 53pc of Alon USA shares
it does not already own in a stock-only transaction valued
at $464mn, the company said. The US independent refiner
began buying Alon shares in 2015.
The acquisition includes Alon's 73,000 b/d refinery in Big
Spring, Texas, one of the closest refineries to resurgent
Permian basin of west Texas and New Mexico. That refinery,
combined with pipeline access from the region into east
Texas, would allow Delek to command better quality and
prices through purchasing 200,000 b/d of west Texas crude
for the company's 73,000 Tyler, Texas, and 80,000 b/d El Dorado, Arkansas, refineries. Alon's retail network of more than
300 stores in the region would also benefit from an uptick in
drilling activity.
Page 8 of 10
Argus North American Sulphur and Sulphuric Acid
Issue 17-1 | Thursday 5 January 2017
Alon's Big Spring refinery has an estimated operational sulphur capacity of 40,000 t/yr.
"I do believe the Permian brings a tremendous amount of
opportunity for our company," Yemin said.
Alon's 74,000 b/d refinery in Krotz Springs, Louisiana, can
also run Permian crude. Delek holds roughly 20,000 b/d
of space on the Colonial products pipeline system running
through Louisiana to supply the southeast and US Atlantic
coast.
But the light, sweet refinery depends on barges, rather than
pipelines, to deliver that supply. Krotz Springs will also need
investment to improve both general operations and regulatory compliance. And the facility currently exists in a variable
master limited partnership (MLP), a variant of a corporate
structure more associated with stable logistics assets. Delek
does not plan to continue that structure, Yemin said.
"We do not take an idea of shutting down a refinery too
light, so we do not want to make a mistake and regret it,"
Yemin said. "I am not going to put a gun on the table with a
timeline, but, obviously, this is heavy on our mind."
Other assets could prove a tougher fit. An Alon-owned AltAir
biofuels operation at a former Alon refinery in Paramount,
California, could fit well with Delek biodiesel plants in east
Texas and Arkansas, Yemin said. But Alon's 70,000 b/d refinery in Bakersfield, California, idled since 2012, made less
sense for the combined company.
"We need to look at that strategically," Yemin said. "Probably
see if there is a different use to that, or a different use for
somebody else."
Valero hits out at US rail charges
US independent refiner Valero has asked the country's Surface Transportation Board (STB) to declare as "unreasonable"
certain railcar fees charged by western railroad operator
Union Pacific. Recent changes to tariffs on the Union Pacific
rail system oblige railcar owners to pay for additional movements to and from repair shops. This increases the cost
of owning or leasing units required to transport crude and
refined oil products, including LPG.
Union Pacific would not charge itself similar fees if it owned
the railcars, Valero says. More than 90pc of the railcars
handled by Union Pacific are owned by shippers or thirdparty lessors and are subject to the charges, Valero says.
Copyright © 2017 Argus Media group
Union Pacific relies on private-sector customers to supply
their own equipment to meet demand for crude and product
shipments and satisfy its common carrier obligation.
Union Pacific is unable to cover demand with its own fleet,
Valero says. And the rail operator charges customers fees
that would not apply if it owned the requisite number of
units, and it does not pay shippers mileage for the use of
their equipment, Valero says. The costs of railcar ownership
have climbed in the past 30 years, but Union Pacific has "systematically" ceased paying compensation, the refiner says.
Valero has called for the STB to rule that Union Pacific's
empty-mileage charges are unreasonable. And it wants the
carrier to pay reparations backdated to the tariff's implementation on 1 January last year, and provide any other
appropriate relief, such as mileage fees for the use of
privately owned equipment. Union Pacific has 20 days from
mid-December to file a formal reply to the STB. Propane rail
shipments form a vital part of US transport infrastructure,
but congested networks have created bottlenecks across the
country. A total of 10 states recently identified 270 rail projects as essential to help free up the system. The developments would cost at least $6bn.
LyondellBasell to keep Houston refinery
LyondellBasell will keep its 268,000 b/d refinery in Houston,
Texas, after a months-long reviewfor potential sale.
The company last year said it would consider selling the
facility, a complex refinery on the Houston Ship Channel.
LyondellBasell notified refinery employees this morning, a
spokesman said.
"We have always said that the refinery may be of higher
value as part of a larger refining system," spokesman Michael
Waldron said. "But over the past several months, as we have
looked at a variety of factors, we have determined that it is
of significant value to us."
Saudi Aramco in October denied bidding on the refinery.
Valero has not commented on the refinery but said it would
only consider adding refining capacity in the US Gulf coast.
PBF Energy was also interested in US Gulf coast capacity,
but at a low price.
LyondellBasell's Houston refinery struggled with operational
problems last year, including crippling power and steam
losses and a fire that damaged a coking unit in April.
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Argus North American Sulphur and Sulphuric Acid
The company acquired the refinery in a joint venture with
Citgo in 1993 and took sole ownership of the facility in 2006.
Heavy Venezuelan crude remained a substantial portion of
the refinery's feedstock for the next five years.
But the refiner began trimming those imports in 2011,
staunching a flow averaging 209,649 b/d to just 21,768 b/d in
the first 10 months of 2016, according to the Energy Information Administration (EIA).
Issue 17-1 | Thursday 5 January 2017
Announcement
Argus is uniting its businesses under a single brand
name. From January 2017, the name of Argus FMB
North American Sulphur and Sulphuric Acid will change
to Argus North American Sulphur and Sulphuric Acid.
Please contact [email protected] if you have any
questions.
The Houston refinery continued to rely on Latin American crude supply. Imports from Colombia and Mexico have
consistently comprised the bulk of LyondellBasell's crude
capacity since 2013.
The refiner described plans to increase runs of Canadian
crude as Seaway and other pipelines began to make heavy
production from Alberta available to Houston Ship Channel
refiners. Imports to the refinery did increase, most consistently in 2015 when flows peaked at 66,367 b/d last November.
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