OUTLOOK ’18: European HCl market reaches its turning point

21 December 2017 15:00 Source:ICIS News

LONDON (ICIS)--The European hydrochloric acid (HCl) market is reaching a turning point as demand is expected to grow next year for this structurally long market.

Sellers are optimistic regarding the future of the market, particularly in northwest Europe where prices have fallen over the last 4 years.

“[There may be] some constraints on supply side, which means that after many years, 2-3 years with sharply dropping prices and price erosion we indeed now see the changing point in the market,” said one producer.

The upward pressure on pricing sentiment has been suggested by multiple sellers, who are confident that buyers also note that market dynamics are changing, though buyer feedback has been limited so far.

“The market is prepared for a change and an increase,” the producer added.

The last two years saw significant decreases in northwest European annual contract prices, and this year spot prices reached dramatic lows as surplus volumes flooded the market.

Price assessments (€/tonne):

Region (FD) 2017 2016 2015 2014
Germany 15-35 20-45 45-70 65-75
Belgium 25-55 50-65 60-80 80-120
Mediterranean 60-120 60-120 60-115 60-90
N. France 50-85 50-85 65-100 90-120

For the majority of this year the European market was oversupplied, and parts of northwest Europe remain heavily supplied at present.

In recent months, there have been pockets of tightness, notably in Germany and France where logistical issues and production problems caused short-term supply constraints.

Annual contract negotiations are underway with some producers targeting increases for 2018. European producer Covestro has announced a €10/tonne increase across Europe as of 1 January 2018.

Price increases have also been targeted in Germany; one trader said prices between €55-70/tonne were being discussed this month for northern and eastern Germany. Further market feedback is pending.

Meanwhile, oversupply in the Benelux region is said to be placing downward pressure on negotiations. Another trader said prices had fallen below the level agreed for 2017.

Nevertheless, market growth is expected to begin next year, led by the additional demand from Aliphos’ di-calcium phosphate (DCP) production in Dunkirk, France.

However, Aliphos’ position on HCl is dependent on the product’s availability and pricing, as the DCP plant will be able to use both HCl or phosphoric acid, or a mixture of both as feedstocks.

The plant’s commission phase has begun and the ramp up period will follow; it is expected to reach its full capacity of 220,000 tonnes/year in mid-2018.

Aliphos is currently in the middle of contract negotiations for its raw materials for 2018. Though the producer can recycle HCl from the production process via the co-product calcium chloride, spot material may also be required.

“In the medium-term we will use the Ecophos technology to recycle the HCl, but fresh product may still be needed in smaller quantity”, said John Gustin, head of investor relations at Aliphos.

The additional demand, and increased cost for logistics are said to be the main reasons for increases by producers.

Divisions between buyers and sellers are clear, with some producers taking a bullish stance on negotiations.

Negotiations are expected to conclude in mid-January.

By Eashani Chavda