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Global sulphuric acid market – back and to the future Since the 1990s, global production of sulphuric acid has increased significantly. Along with greater availability, the boom in many commodity prices in 2007-08 saw new market players emerge. Despite a year of survival in 2009 following the global economic recession, many of the newer companies remained involved in the traded sulphuric acid market. The emerging trend now, however, is one of consolidation in the industry despite the forecast for even greater production. Europe because of their origin within base metal majors. All three traders were active in selling to the US and Brazil, then the dominating import regions. This article will take a historic look at the global sulphuric acid market as well as a look forward to what can be expected with the “king of chemicals”. To meet the demand of these US consumers, companies invested in tank capacity. Interacid through its own Sulphuric Acid Trading Company (SATCO), which at that time was a venture with Freeport McMoRan Copper & Gold, added tank capacity at Tampa in the late 1980s with BCT following suit. In the early-1990s, imports into Tampa reached as high as 1mn t/yr before slipping to around 650,000 t/yr by the mid1990s. This was a sign of things to come. By 2013, sulphuric acid imports into Florida were close to just 70,000t. 1990s – low prices in sulphuric acid related markets In the mid-1990s, world sulphuric acid trade volumes were around 6.5mn t/yr accounting for mostly short-haul trade within Europe, within Asia and from Canada to the US. These regions were key suppliers because of their base metal smelters, the primary source for traded sulphuric acid. That regional dominance remains today At that time, prices in the global sulphuric acid market and related markets were low compared with today’s levels. The US Gulf/ Tampa import price for sulphuric acid was the benchmark price and it was around $30/t cfr. Meanwhile, the molten sulphur benchmark price was $60/lt delivered at Tampa while the solid sulphur export price was around $60/t fob ex-Vancouver. In the fertilizer market, then and still the primary consuming market of sulphur and sulphuric acid, the diammonium phosphate (DAP) price was $175/t fob Tampa for exports. The copper price, then not seen as a significant indictor for the markets, was around $0.85/lb. World acid trade was then dominated by three Switzerlandbased trading companies. The market leader was Interacid, then part European-owned and part by Sumitomo of Japan. Interacid held a strong supply position in Europe and held the exclusive rights to exports from Japan for destinations outside Asia. In addition, Boliden Chemtrade (BCT) and Metallgesellschaft (MG) had strong supply positions in Fertilizers illuminating the markets The US market was then of huge importance to the global traded market because of the significant phosphate fertilizer industry. There were around 10 companies operating in the Florida “Bone Valley” region alone including IMC, Cargill, CF Industries and Agrico as leading producers. The then higher volume of need for offshore imports to the US was to support phosphate fertilizer production, and demand was compounded further by the consolidation in domestic smelter acid production which began in the late 1980s. As a result, sulphuric acid produced at smelters in eastern Canada was exported to the US by companies such as Marsulex. Alkylation acid majors, including General Chemical and Rhone-Poulenc, also played an important supply role in the market as well as sulphur-based producers. During these years, Interacid and BCT were starting to invest in logistics to serve the emerging Chilean market, whose importance in the global market was truly felt by the 2000s because of its need for sulphuric acid to support the copper industry. 2000-07 – stable prices amid industry consolidation and restructuring World sulphuric acid trade had steadily increased to about 8mn t by 2007 and long-haul trade accounted for a larger portion of that volume, at around 5mn t. A contributing Market Reporting Consulting Events Global sulphuric acid market – back and to the future factor was the opening of two large smelters in South Korea in 1999, resulting in South Korean export volumes being comparable to Japan’s by 2007. Exports from the region represented the largest source of supply, followed by Europe. price was $70/lt delivered Tampa. Offshore solid sulphur prices reached $65/t fob Vancouver and DAP prices firmed more dramatically to $250/t fob Tampa for exports while copper had risen to about $2.50/lb. With more production from South Korea, China played an important role in balancing the market, importing 2.1mn t of sulphuric acid in 2006. Out of the total, 58pc was supplied from South Korea and 41pc from Japan, mostly handled directly by smelter acid producers. By 2012, China’s import volume dipped to around 1mn t, but its role in balancing the market has remained, particularly during times when South Korean smelters are long. 2008-09 – unprecedented boom and bust As a result of increased trade in Asia, the US played less a role of balancing the market. Consolidation in the phosphate fertilizer industry and a growth in sulphur production also contributed to less offshore interest in the US, though imports from Europe play an important role in the supply chain today. Focusing on Tampa alone, the need for acid imports essentially disappeared after 2004, when Mosaic was formed as the vehicle by which Cargill acquired the assets of IMC including the former Agrico plants. Smelter acid closures in the US did not have a major market impact although the dependency on remaining eastern Canadian smelters to supply the US industrial market increased, and remains an important component of the supply chain. At the same time, demand in Chile began to increase to support copper ore leaching. As an indication, Chile’s sulphuric acid imports were around 340,000t in 2004 before increasing significantly to close to 1.4mn t by 2007. Outside of volume placed directly by smelters, Interacid and BCT remained dominant while a new player – Transammonia (now known as Trammo) – emerged. With the growth in production in South Korea, Interacid, now wholly owned by Sumitomo, had been unable to hold onto its exclusive position with regard to exports outside Asia, allowing others to step in and resulted in Trammo’s market entry. Meanwhile, since 1998 BCT had Canadian owners. German trader MG had virtually exited the international acid market. All three leading traders invested heavily in Chile. Major sulphur trader ICEC also began to be active in the sulphuric acid market as did smelting major Glencore. Fertilizer and base metal prices, compared with the 1990s, had firmed and by 2007, the Tampa import price for sulphuric acid had increased to $50/t cfr and the molten sulphur argusmedia.com The well-known run up in global commodity prices in 2008 impacted sulphuric acid and related markets. For these markets, demand in China drove DAP prices up to $1,200t/cfr China by mid-2008. This allowed sulphur prices to rise accordingly, reaching a peak of $800/t fob Vancouver. The Tampa molten sulphur price reached $600/lt delivered in the third quarter 2008. The sulphuric acid import price into the US peaked at $440/t cfr in the same quarter. All these price surges were driven by the need to make more DAP. Copper was trading at over $4/lb. The over-heated market collapsed even faster. By the first quarter of 2009 Tampa sulphur was $zero/lt delivered and sulphuric acid was landing in the US at below $15/t cfr for most of 2009. In the US market, early in 2009 was the first time eastern Canadian marketers could not guarantee movement of acid from smelters and for containment issues, involuntary production cutbacks were imposed on smelters. The consequences of the global economic recession for the sulphuric acid market were significant. During the boom, new sources of smelter acid such as west coast India were attracted into the market. Sulphur-based acid in Europe and even China also became exportable. Most of these new sources disappeared as quickly as they came, but new opportunities were thereby revealed. The key change going forward was the acid trading community became still more fragmented. ICEC (now owned by Oxbow) took the opportunity to get involved in exports out of China and increased its acid trade volume. The opportunities in sulphuric acid were noted by a number of fertilizer traders. Several jumped into the market, with some like Ameropa and Quantum still involved in the business. 2010 and beyond – supply to increase on new smelter capacity but how will demand match up? Demand for phosphate fertilizers and other commodities improved in the fourth quarter of 2009 which saw prices for products increase going into 2010, when relative 2 Global sulphuric acid market – back and to the future stability was also exhibited in sulphuric acid. Since then the sulphur market has been in a supply deficit which not only supported prices, but also encouraged volatile pricing cycles when traded levels can yield a $30/t spread in one month. For a market that is typically more closely tied to the base metals market, the price volatility in sulphur had a stronger-than-expected influence on price ideas in the sulphuric acid market. Prices weakened during the second half of 2013 in response to the sulphur price collapse. This was attributable to reduced demand for phosphate fertilizer in India putting downward pressure on sulphur prices. This also reduced demand for spot sulphuric acid to augment sulphur-based production to support phosphoric acid. In today’s market, smelter sulphuric acid prices have fallen back to historical levels while prices for sulphur and DAP trend much higher. The US import price for sulphuric acid is $50/t cfr but the molten sulphur price has ticked up to $133/lt delivered Tampa. Offshore solid sulphur prices are higher at $145/t fob Vancouver and DAP prices rise significantly from 2007, to $455/t fob Tampa for exports. On the base metals front, copper is trading at around $3.12/lb, still up on historical levels. Global acid trade at present is stable with players remaining the same. Chile is still the main importer but its import needs are peaking. North American Sulphur, Sulphuric Acid and DAP Prices 2007 – 2014 1400.0 1200.0 1000.0 800.0 600.0 400.0 200.0 Jan 2007 Apr 2007 Jul 2007 Oct 2007 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009 Apr 2009 Jul 2009 Oct 2009 Jan 2010 Apr 2010 Jul 2010 Oct 2010 Jan 2011 Apr 2011 Jul 2011 Oct 2011 Jan 2012 Apr 2012 Jul 2012 Oct 2012 Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 0.0 DAP $/t fob Tampa Sulphur $/t fob Vancouver Sulphur molten $/lt del Tampa qtly Sulphuric acid $/t cfr US Chile’s prominence as the world’s largest seaborne importer had been rising with its import needs peaking at 3.2mn t in 2012. Buyers received acid from diverse locations with the majority coming from Peru, Japan, South Korea, Mexico and Spain, augmenting Chile’s domestic supply. But Chile’s offshore import needs are already tailing off since argusmedia.com Noracid’s sulphur burner in Mejillones came on stream in 2011. The sulphur burner encountered operational problems and only managed to run uninterrupted in 2013, producing sulphuric acid at a rate of 720,000 t/yr for its four offtakers: BHP Billiton, Antofagasta Minerals, Freeport McMoRan Copper & Gold and Barrick Zaldivar. Chile’s reliance on offshore imports will weaken in the medium term as more heap leaching operations discontinue. Between now and 2025, copper production from solvent extraction and electrowinning (SX-EW) plants in Chile is widely expected to drop, meaning the demand for sulphuric acid will decrease. The only significant project that could add to Chile’s current sulphuric acid demand is Antofagasta Mineral’s Antucoya copper project, which is expected to have an annual requirement of around 500,000t. But if Noracid manages to find investors to support the building of a second sulphur burner, the country’s import needs will only fall further. This leaves sulphuric acid markets looking for other markets to absorb supply that is expected to rise by a further 7pc to nearly 260mn t in 2017. The attention is now on the Philippines, where nickel leaching projects Coral Bay and Taganito together consume around 1.3mn t/yr of sulphuric acid when running at nameplate capacities. In recent years, the Philippines had been a net importer thanks to the two nickel leaching projects. Exports out of the Philippines declined to 98,000t in 2013 from 384,000t in 2010. But in 2014, more exports will be coming from the Philippines – particularly from the PASAR smelter, owned by GlencoreXstrata – because PASAR’s major sulphuric acid offtaker Philphos suffered heavy structural damages from typhoon Yolanda, which landed on the island of Leyte in November 2013. Philphos is not expected to restart in 2014, and until it does, one-third of the 600,000 t/yr smelter acid production from PASAR will have to find a new home. Turning to the supply side, major exporters of sulphuric acid are unchanged, featuring South Korea, Japan and Europe. Between 2010 and 2013, South Korean sulphuric acid production averaged around 2.7mn t/yr. To market this production, smelters offered some of the sulphuric acid under tenders. Traders that took positions in 2012 under these tenders saw prices dipped in 2013 and suffered losses. Going forward, Korean smelters are keen to allocate more of their quantities to China and the Philippines, given that Chilean buyers’ price ideas dropped lower as their import needs decreased. For the same reason, smelters will also 3 Global sulphuric acid market – back and to the future raise their game in competing with other southeast Asian suppliers for market shares in India, Thailand and Vietnam. In northwest Europe, the majority of the business is still represented by regional trades but smelters are still dependent on offshore trading. In the second half of 2013, the dip in phosphate prices led to a cut in global DAP production and demand for sulphuric acid dropped in markets such as Morocco. Exports of sulphuric acid out of northwest Europe corresponded with this and fell to negative values as smelters struggled to find outlets for their byproduct acid production. Fertilizer and industrial demand for spot acid from the US, North Africa and Latin America will still have a grip on what free on board levels European smelters can achieve in the future. China’s role in the global trade market could also change in the coming years, moving from a net importer to a net exporter as new smelter capacity is added. One of the smelters that can change the balance is the Jinchuan copper smelter in Guangxi, which started up in 2013. The plant is ramping up and is expected to reach closer to its nameplate capacity of 1.2mn-1.5mn t/yr of sulphuric acid later in 2014. Until then, the smelter is managing its stock levels via sales to local customers and is under no pressure to export. Other than Jinchuan, more smelters are set to enter, or expand, production in the coming years and in 2015 alone, there are expectations of a 1.5mn t/yr increase in smelter acid production for the said reasons. Mergers and shakers – the rise of GlencoreXstrata The players producing and marketing sulphuric acid have changed in the past few years. In 2011 ICEC was acquired by leading petroleum coke marketer Oxbow, and Chemtrade Logistics bought Marsulex, from which it had spun off in 2000. In 2014, Chemtrade Logistics acquired General Chemical and Mosaic agreed to buy CF Industries’ phosphate business. But the potential game changer took place in 2013, when Glencore acquired Xstrata. This put several smelters under new ownership, including ones in Canada although acid marketing from those via NorFalco was not affected. The immediate impact is that GlencoreXstrata now handles a significant 6mn t/yr of sulphuric acid production globally – although not all tonnage is for seaborne trading – but one of the more subtle implications of the acquisition applies to the marketing and running, or discontinuing, of several production points. One example is in Australia, where GlencoreXstrata owns the Mount Isa copper smelter that is feeding smelter gas to Incitec Pivot’s Phosphate Hill operation to supply around 700,000 t/yr of sulphuric acid to the phosphates project. Following Glencore’s acquisition of Xstrata, there has been speculation over the status of the smelter, originally set to shut in 2016 when under Xstrata ownership. The decision may be reversed, with the market waiting for an official announcement sometime in 2014, and this will have a strong bearing of the balance of sulphuric acid in Australia in the medium to long term. Meanwhile, in North America, Xstrata was poised to cease supplying nickel concentrates to Noranda Income Fund’s Valleyfield, Quebec, smelter by 2017 resulting in the loss of around 500,000/t yr of by-product sulphuric acid production. As with the Mount Isa copper smelter, this could change under the GlencoreXstrata regime, which has until November 2016 to make a decision. In the US, despite less dependency on offshore import supply, additional sulphuric acid tank capacity in coastal areas to facilitate imports could be added. Locations in the US Gulf coast and eastern seaboard have been discussed in the market with companies such as GlencoreXstrata among the companies said to be considering adding infrastructure. Increased US import ability could allow suppliers place volume in a market where import needs in key markets such as Chile are peaking and global production is set to increase. 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