US HCl market awaits 17% capacity increase over next several months

Focus story by Bill Bowen

HOUSTON (ICIS)–The US hydrochloric acid (HCl) market, today facing sharp upward price pressure on constrained supply from plant outages and planned turnarounds, will soon be awash in acid as six projects on the verge of starting up will add an estimated 921,000 wet tons (835,700 tonnes) of production capacity in North America over the next nine months.

The additions will add almost 20% to US production capacity and much of it will begin operation in the third and fourth quarters of 2014. 

But most market participants do not expect that it will quench the current thirst for HCl until the end of the year. Others forecast that it will be second quarter 2015 before the supply lines are recharged and regional shortages are ended by the new supply.

The producers of the new plants say that rising demand, particularly from the oilfield, is driving the massive expansion. But general economic growth is also a factor: HCl is used in food processing, cleaning freshly produced steel, agriculture, pulp and paper production, water treatment, fertilizer, leather processing and other uses.

“It’s the tightest I’ve ever seen it,” said the marketing director for a major US producer, echoing sentiments expressed by several market participants.

Many HCl buyers have been placed on allocation, able to receive only about 70-75% of their usual orders, market sources said. 

“If you look at demand, it’s been up across the segments,” said Paul Timmons, president of Erco Worldwide which is expanding capacity at plants in the US and Canada.

He said that oil and gas activity particularly is growing. Erco’s Wisconsin and Saskatchewan plants are near the Bakken and other shale fields in the northern US and southern Canada.

“We’re going to have to rush to get this burner up and running to meet our customers’ needs,” he added, citing a mishap in transporting parts of the Wisconsin plant last year that put the project a year behind schedule.

This week Erco Worldwide is beginning the start-up of its new 120,000 wet tons/year acid burner at its Port Edwards, Wisconsin, plant, a doubling of the plant’s capacity. The company will ramp up another 77,000 wet tons/year expansion at its plant in Saskatoon, Saskatchewan, as soon as the Wisconsin plant is up and running.

Wet tons describe a solution of 35% acid, also known as 22-degree Baume. In 65% water, wet tons are less corrosive and safer to transport and handle. It is also the concentration most used in the oilfield.

OxyChem and US Magnesium will fire up new acid burners by the end of August, their product will not likely be available in commercial quantities until October, or thereafter, representatives at the companies said. Their capacities will be 160,000 and 120,000 wet tons/year, respectively.

Additionally, Skyonics, a new start-up company based in Austin, Texas, in October plans to ramp up its Skymine plant in San Antonio, Texas. The plant is designed to mineralise CO2 emissions from a neighbouring concrete plant. The plant has a design capacity for 194,000 wet tons/year, but its ramp-up timeline is less clear. The plant uses a new and untested technology and its development is being followed closely. Most observers think it will be months before it runs near full capacity.

Additionally, by early next year, production from a Harris & Ford chlor-alkali plant in Eddyville, Iowa, will begin entering the market. The plant is being built next to a Cargill facility and will serve all US Cargill facilities, Harris & Ford company information said. But significant amounts will also be sold in the merchant market, according to company information.

The new acid will enter a welcoming market. Production problems at Bayer, DuPont and other plants during the spring and summer and a scheduled turnaround now underway at BASF’s giant complex in Geismar, Louisiana, have dried up a nagging surplus that had driven prices down during the first quarter.

The short supply, coming at the peak season for demand from bleach, water treatment and oil field activity, has pushed prices up sharply. Since mid-June, prices for 22-degree Baume have risen by $50-60/ton on an ex works US Gulf basis.

Additional price increases have been proposed by some producers for September and most market participants expect it to keep rising during the third quarter.

The new production will be slow to refill the supply chain because of HCl’s regionality. It is expensive to transport, so most of the new product will be easing local shortages. That dynamic will also take months to play out as supply patterns shift to accommodate the new material.

Cam Tissington, vice president of sales for US Magnesium, said the company expects ample demand from mining and oilfield activity. But it also serves other markets.

“I wouldn’t want to put a limit on our opportunities,” Tissington said of the plant’s production, which will come from Rowley, Utah, a suburb of Salt Lake City. “But there is a fair amount of oil and gas activity in this region, too.” 

Erco’s Timmons said that HCl production also helps large chlor-alkali producers place what would otherwise be surplus chlorine production. It is difficult to store chlorine, so chlor-alkali producers usually cut back production to avoid oversupply of chlorine thus crimping production of caustic soda. 

But it has been in the oilfield that HCl has found a booming outlet. HCl is pumped into freshly hydraulically fractured bore holes to dissolve limestone and other minerals that might constrict flow from the shale micro fractures.

A major distributor of hydrochloric acid said that oil and gas production service companies will often pay a premium for HCl for immediate delivery, but servicing those customers is very difficult and dangerous. 

Major US HCl producers include Dow Chemical, BASF, Bayer Corp., Olin, OxyChem, Huntsman, DuPont Flouroproducts and, in Canada, Canexus.

New hydrochloric acid production