7/25/2017 How do acid prices affect smelter revenues in different regions of the world?

FOB levels, reecting delivered acid prices not covering the cost of delivery to the
customer.
The global trend of decline in acid prices has cut the average revenue from acid at smelters but this effect has not
impacted all smelters to the same degree. The factors that affect the scale of change in revenues are the share of acid
sold to export vs. domestic markets and the relative pricing of those export and domestic market.

Domestic market prices are typically more stable and follow a longer term trend whereas traded market prices have a
higher degree of volatility. For example, the domestic contract price for acid in NW Europe has fallen between 2011
and 2015 by 41% where as the NW Europe export price has fallen by 76%. The differences are more signicant when
looking at the extremes of the price ranges since 2011.

Export vs. Domestic sales share price effect

Market price volatility is only one factor that affects smelter revenues from acid. The other factor is the exposure to
domestic and export markets. Domestic markets are more stable prices and show less variance within a given year.
Smelters with a greater share of sales within the domestic market have more stable and generally higher revenue from

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7/25/2017 How do acid prices affect smelter revenues in different regions of the world?

acid sales thank exporting smelters. NW Europe, Japan, South Korea and SE Asia are the major smelting regions
which are actively engaged in the international sea borne trade of sulphuric acid. In contrast, Chile, India and China are
markets which have the major share of sales into domestic markets. The effective price a NW European would have
achieved in 2015 could have ranged from $75/t to $26/t depending on whether all sales were placed domestically or in
export markets. The variance in realised prices has increased in 2016 due to the weakness in the global traded acid
market. In Europe and Japan/South Korea there have been negative FOB prices whilst domestic markets have
remained stable. This causes average realised prices to fall faster as some sales to the export market have actually
made a negative contribution to revenues.

Smelter Revenues by revenue stream

Acid price volatility has caused its share of global average smelter revenues to vary. The chart below shows the
breakdown of smelter revenues by revenue stream for the global average annual revenues. Since 2007, global smelter
revenues have increased; however, the contribution made by acid has varied from 47% to 15%. At times of high global
acid prices revenues from acid increase and at time of low global acid prices revenues fall. However, as discussed
already the impact extent of the impact is variable depending on the market in while the smelter is located.

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