Asia sulphuric acid reaches mid-year balance despite shaky start

Focus article by Kate Wilcock

BRISBANE (ICIS)–Fundamentals in the Asia Pacific sulphuric acid market are finally looking more balanced as 2014 enters the mid-way point, but it has been a slow grind for producers to return to positive netbacks.

In January, spot volumes in southeast Asia were available around zero, $0/tonne FOB (free on board), but this was an improvement on late 2013 when cargoes were sold at negative netbacks (-$5/tonne FOB), as low demand and surplus volumes usually destined for key-export market Chile were absorbed throughout Asia.

Sentiment was mixed, with some producers hopeful that rocketing sulphur prices which reached $215/tonne CFR China, would lift sulphuric acid values.

However, buyers eagerly awaited the return to operations of the Philippine Associated Smelting and Refining Corporation (PASAR) smelter the maintain downward pressure on prices, following its unplanned closure in late 2013 due to a typhoon.

In February, demand from Petrokimia Gresik (PKG) was a saving grace for surplus smelter acid tonnes, with the fertilizer maker regularly entering the spot market for 18,000 tonne volumes.

A planned maintenance at local copper smelter PT Smelting and the ongoing outage at PASAR saw PKG buy seven cargoes in the first quarter.

The demand in neighbouring Philippines in the form of the Taganito nickel mine – which uses high pressure acid leach (HPAL) technology – was the boon Japanese smelters needed following unattractive prices in Chile.

Prices on a FOB basis from Japan firmed to around $5/tonne, while netbacks into Indonesia remained slightly lower.

A number of Japanese producers and traders have shareholdings in the nickel mine which saw a swathe of volumes from Japan moved to the Philippines and left little available for the spot market, adding some strength for positive netbacks.

The demand from the Taganito mine is understood to be around 800,000 tonnes/year and while the mine was still gearing up during this time, additional volumes were contracted from South Korea.

In March, India continued its consistent demand  – with most buyers taking full contracted volumes and spot buying interest seen.

Some wobbles in demand were noted form the Taganito nickel mine and some volumes were understood to be pushed back with maintenance taking place.

Smaller pockets of demand were noted from Vietnam, with a buyer semi-regularly looking for 5,000 tonne cargoes.

In April, the pending return of the PASAR smelter saw a number of smelters in Japan, Korea and Australia all planning turnarounds.

The PASAR smelter returned to operations late in April, however some swap deals were seen to cover previous deals while production was ramped up.

India’s demand was slightly stalled with planned turnarounds at two fertilizer producers – however normal demand resumed shortly after.

Quarter two (Q2) negotiations were mostly positive for producers, with slight increases on Q1 prices.

Bullish factors of tighter supply and stronger demand from buyers with the ability to switch between sulphur and sulphuric acid proved stronger on the negotiation table than weaker demand downstream from the phosphate sector.

However, contract volumes from Japan to China decreased, while volumes from South Korea to China increased during Q2.

In May, producers were again feeling the pressure of the product available from the PASAR smelter, with around 50,000-60,000 tonnes available each month with the adjacent Philphos fertilizer plant at Isabel, Philippines, not taking its regular volumes as it was still not repaired following the typhoon.

The mid-term supply of acid was added to, with the news in Australia the Nyrstar Port Pirie lead smelter near Adelaide, would be upgraded. The smelter which produces around 50,000/year of sulphuric acid, would be ramped up to around 300,000 tonnes by the end of 2016.

Unplanned outages at LS-Nikko’s copper smelter in Ulsan in May and planned maintenance following that in early-June saw spot volumes restricted and contracted volumes met with the assistance of sister company Pan Pacific Copper (PPC) in Japan.

In June, the sulphuric acid market was performing an intricate balancing act, with the outage of the LS-Nikko copper smelter in South Korea being offset by sales from Japan and buying interest throughout the region minimising the downward impact of aggressive sales of acid from the PASAR smelter. Prices in southeast Asia were around $2-5/tonne FOB depending on origin.

China remained out of the export market with Two Lions continuing to run just one of its two sulphuric acid lines. The Jinchuan Nonferrous Metals smelter in Guangxi province also went into a 20-day turnaround in June, with around 60,000 tonnes of acid said to be lost during this time.

On the demand side however, PKG again rose to the occasion and its joint venture with Jordan Phosphate Mines phosphoric acid plant called PT Petro Jordan Abadi, which is said to be operational, taking a number of tonnes from PASAR following a March agreement between PKG and GlencoreXstrata.

The Energy Resources Australia (ERA) Ranger uranium mine was allowed to restart on 5 June, which added to positive sentiment with the mine taking around 150,000 tonnes of acid/year.

In Thailand, demand is weak and will remain so until end-July with Ube Industries carrying out its major two-and-a-half year turnaround. It is understood Ube may have some spot demand later in the year – pending import licenses.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections