Sulphuric acid demand outlook mixed for 2020 as contract talks continue

Author: Andy Hemphill

2019/11/07

LONDON (ICIS)--As sulphuric acid players prepare to assemble in Rome for this year’s second European Sulphuric Acid Association general meeting, buyers, traders and producers’ outlooks on demand for next year remain sharply divided.

In Europe, downstream demand from caprolactam (capro), automotive, fertilizer and chemical manufacturers remains weak.

Despite maintenance turnarounds, some players say acid supply is long. One downstream acid buyer says it is attempting to resell contract deliveries, “as we don’t need the stuff”.

The buyer’s perception is if demand remains so weak into 2020, prices may decline.

Traders and producers, however, counter that there is no length in acid supplies currently, especially amid soon-to-conclude maintenance turnarounds.

Aurubis’ Hamburg complex is due online this week; with Nyrstar’s Balen unit in Belgium expected on-stream shortly after.

Poland’s KGHM is due back online at Legnica in end-November.

Further afield, in key sulphuric acid importing nation Chile, there has been little disruption in sulphuric acid supplies; despite widespread civil unrest.

Protests continue against the government of President Sebastián Piñera. Piñera has made concessions to protestors, including proposed reforms, and the president’s cabinet is also mid-reshuffle.

Longer term, 2020 contract business has concluded to Chile at $68-74/tonne CFR (cost & freight) Mejillones, with the upper end of the range representing more prompt tonnes.

2020 contract talks are expected to conclude before the end of November.

Spot material is priced around $71-76/tonne CFR, although there is speculation that offers will tick up, based on high freight rates.

Increased freight rates resulting from incoming IMO 2020 legislation is an increasing concern for Chilean importers, and a key issue in the ongoing 2020 long-term contract talks.

In China, sulphuric acid producers in the south and southeast can sell domestically around yuan (CNY)150/tonne EXW (ex-works) - equivalent to $20/tonne EXW, leaving little impetus to export at lower netbacks.

Two Lions was heard to have concluded spot sales to India in the last two weeks with a netback of around $12-14/tonne FOB (free on board) China, although no further details were forthcoming.

The Chinese major is also said to have concluded sales to New Zealand and Australia, although this is also unconfirmed.

Two Lions is sold out on spot acid until January, although the producer plans to place Q1 tonnes in upcoming talks with traders – although what sort of volumes will be allocated for international export is less clear, the company says.

There is unconfirmed talk that Jinchuan Group and Chinalco's Southeast Copper have pushed export offers up by $2-4/tonne to around $15/tonne FOB China, although no business has been heard concluded at this level.

There is also talk that Chinalco is taking advantage of an outage at Jiangxi Copper to expand its customer base in its rival's home territory.

Jiangxi is on a maintenance for around one month.

Rival player Anhui Tongling is also understood to be offline from 10 October, for 40 days. Anhui has also planned a second maintenance at one of its pyrite units, staring mid-late November.

One bright spot in an otherwise subdued market is India, where a good monsoon has spurred import demand for acid volumes.

This week it was heard Singapore-based trader Wilson International sold 20,000 tonnes of China-origin sulphuric acid to IFFCO in the low-$30s/tonne CFR India.

Shipment is in mid-November to Paradip. IFFCO has not confirmed the trade, saying only that it is in talks.

Last week it was heard  Indian fertilizer producer FACT awarded a 10,000 tonne sulphuric acid import tender to Wilson at $37.50/tonne CFR India, with 90 days’ credit. FACT and Wilson confirmed this trade.

Negotiations for long-term import contracts with Indian buyers are yet to begin in earnest, although there is an expectation that talks will begin around the Fertilizer Association of India annual conference in early December.

Indian buyers will remain opportunistic on acid purchases into 2020, according to buy-side players, as import sulphur prices remain low.

Click to enlarge graph

"We've got plenty of options," one buy-side source says.

Phosphoric fertilizer demand will also be a key consideration, although news of a better-than-expected monsoon may signal an increase in demand in late Q4 and into Q1 2020.

Finally, Indian fertilizer major Coromandel has been heard in talks with producers and traders for sulphuric acid supplies in 2020, although the importer’s bids are described as aggressively low.

“Every time we talk, [CIL] cuts its bids by $2,” says one Switzerland-based trader.

It was heard CIL may be looking to source up to 900,000 tonnes for 2020.

It is understood CIL is speaking directly to Chinese and South Korean producers; alongside traders, leading to speculation the key Indian importer is seeking to open new routes of supply, without the involvement of traders.

Focus article by Andy Hemphill