UK sulphuric acid buyers ‘in a panic’ as INEOS ends domestic production

LONDON (ICIS)–The UK’s sulphuric acid market is in disarray in the wake of international chemicals major INEOS’ decision to permanently close its Runcorn sulphuric acid plant, according to market sources this week.

INEOS announced the formal closure of its sulphur chemicals unit in the UK’s northwest in late March; permanently ending the company’s domestic sulphuric acid production.

In a letter to customers, INEOS, which trades from Runcorn under the name INOVYN, said the decision signalled its “withdrawal from the UK sulphur chemicals market”, following a detailed management review of the business.

Runcorn suffered an unplanned outage in third-party power supplies in October 2020, resulting in the sulphur chemicals plant and attached sulphur burner going offline.

During a controlled restart, INEOS identified that several critical components had suffered damage.

Despite “significant investment”, INEOS concluded it would not be possible to restart the unit for a further 18-24 months, heavily curtailing INOVYN’s ability to supply UK customers.

“Regrettably, the company is therefore left with no option but to keep the plant offline and effect a permanent closure of the sulphur chemicals business,” INEOS concluded.

In the letter, INEOS said it will “work with customers to assist in the transition to alternative supplies”.

However, the departure of INEOS’ sulphur operations from the UK has left a gaping hole in supply for the vital chemical, and downstream customers “in a panic; trying everything to find product,” according to a source at a UK-based chemicals producer and acid distributor.

“We’ve heard INEOS’ supply will end in April. That’s it. Nothing from then,” the source adds.

“We’ve seen prompt purchase tenders for acid issued for delivery within the month. We’re helping one or two customers, and [other UK acid distributors] are doing the same, but there’s no spot available anywhere.”

Acid producers in northwest Europe, including large-volume base metal smelting majors, have also been approached by UK buyers desperate for tonnes; as have those smelters’ customers, some of whom have pondered selling their own contracted tonnes into the UK via road and ferry.

A source at INEOS confirmed the company will no longer supply acid past the end of April.

It was heard the company has attempted to source acid from mainland Europe, but was unable to secure cargoes.

FOB export prices from northwest Europe are at a two-year high, and what spot material can be found has instead been sent to destinations in Latin America, where netbacks on sales into Brazil, Chile, and Argentina are higher.

Asian spot acid availability is similarly limited, making imports from large-volume producers in South Korea or Japan unworkable.

Top five sulphuric acid importers to UK, August 2020-January 2021 (tonnes)

	Aug-20	Sep-20	Oct-20	Nov-20	Dec-20	Jan-21
Finland	5,000	0	62	13,548	4,591	18,026
Germany	11,003	6,865	12,887	9,893	9,675	7,251
Ireland	2,590	2,417	2,735	2,263	1,961	3,309
Norway	5,253	6,304	9,556	0	4,730	3,202
Belgium	109	173	935	824	884	249
World	24,035	23,470	26,184	34,786	24,701	32,040
Source: UK HMRC via TDM

“It’s a very difficult situation,” a Swiss acid trader says of the UK market, adding: “At the same time, who is to blame when for years traders told [UK market players] that only relying on domestic [production] could be an issue one day when something unexpected happens?”

Although the UK’s acid-consuming industries – including water treatment, chemical, and fertilizer production – were not completely reliant on INEOS’ operations at Runcorn, the plant was the country’s main domestic source of sulphuric acid production capacity.

The UK’s port infrastructure is not built for large-volume acid imports, with most suitable berths having tank space for only approximately 5,000-8,000 tonnes at a time.

“What [UK market players] have gained on price differentials versus imports in the last 10 years has disappeared in two months on a force majeure,” the trader adds.

“In the short term, management tend to forget the relationship between price and security of supply. The sad thing is that even a case like this will most likely not change the mindset in future years.”

Another UK-based acid player adds: “There’s nowhere to go and get some product for Q2. Imports won’t be able to cover the shortfall, leaving the UK bottlenecked. The sea tanks are too small. You need 30,000 or 40,000 tonnes [of tank space], and a strategic reserve, so you always have some [acid].”

In the long-term there is a possibility “someone might build a tank big enough” to support the UK sulphuric acid market, the latter source concludes.

Front page picture: INEOS’ facilities in Runcorn, UK
Source: INEOS 

Focus article by Andy Hemphill