INSIGHT: US sulphuric acid yet to feel supply squeeze despite lower production
HOUSTON (ICIS)–The US sulphuric acid market has remained mostly balanced despite a chaotic time due to the coronavirus pandemic and despite feedstock constraints and varying demand requirements throughout the region.
Feedstock sulphur supply continues to tighten, with refinery rates remaining at record lows.
The US Energy Information Administration (EIA) last week placed utilisation rates at 69.6%, an increase from the previous week, but still a sharp decrease from 87.3% last month.
Reduced feedstock production, coupled with decreased smelter production, has tightened sulphuric acid supply.
On the flip side, weak demand from the copper, automotive and refining sectors have in part balanced the market.
Demand is also being supported by stronger sectors like agriculture, water treatment, and paper.
Sources have said imported spot acid has been acquired to ease supply tightness for some buyers, although this is unconfirmed.
US imports of acid have been sharply higher this year so far, according to the ICIS Supply & Demand Database.
Some of this is attributed to SATCO’s new Stockton, California terminal, which has sourced tonnes from Japan, but there have been sharply higher imports from Spain this year as well.
US sulphuric acid suppliers
Freeport-McMoRan is lowering its mining rates in North America by 20% as global copper pricing plummets to record lows, and the New Mexico Chino mine operations remain suspended.
Since the Lone Star copper leaching project is already 90% complete, Freeport will not defer work on the facilities.
However, sources have said the project will proceed more slowly than expected, pushing off that source of new acid consumption.
Additionally, the Excelsior in-situ copper project has been suspended, which consumes acid through supplier ICEC (formerly Oxbow, before being acquired by HJ Baker).
Acid production will be affected by a flash converting furnace at Rio Tinto’s Kennecott, Utah, operations, which require a complete rebuild this year.
The unit sustained damage from an earthquake on 18 March, and there have since been mixed reports on whether sulphuric acid is currently being produced at the facility.
The smelter can produce about 1m tonnes/year.
Production in the US is furthered depleted this year at Grupo Mexico’s Asarco copper mining and smelting operations in Arizona and Texas, where employees have been striking since October, and the company halted Hayden smelter facility as a result.
Asarco’s smelting operations have a sulphuric acid production capacity of around 730,000 tonnes/year; some of the acid is used internally, and some is sold into the merchant market.
SOURCING EXTRA SUPPLY
The California terminal could help maintain balance if the market tightens further, since it provides additional supply options from Asia.
Lending to this, the JBU Opal tanker is expected to unload a Japanese sulphuric acid cargo in Stockton in the first half of May.
However, Japanese smelters have no additional spot material available for export until July, sources said.
Adding on to this, the US may have to compete for European tonnes with Mexico, which has re-entered the global market.
On 23 April, Innophos closed a purchase tender for two 18,000-tonne sulphuric acid cargoes, for end-May and end-June arrival.
According to sources, one parcel was awarded to trader Tricon, sourcing from Europe; a second was awarded to a European producer.
If sulphur burners are able to procure sufficient feedstock supply, they are well poised to fill gaps left by smelters.
However, refiners have indicated they will continue to run at significantly reduced rates as fuel markets are expected to remain weak during the coronavirus pandemic.
Sulphur purchase prices moved up in April, with major buyers Mosaic and Nutrien each separately settling their Tampa Q2 sulphur contracts at $54/long ton DEL (delivered), an $18/long ton increase from Q1.
Sulphuric acid pricing fell in March and April to averages not seen since 2009.
Prices across the globe have fallen to record lows, though a floor may have been reached at the beginning of May.
Insight by Annalise Porter
Additional reporting by Andy Hemphill
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