The sulphuric acid market experienced high price volatility in 2023 largely driven by demand — and in some cases a lack of it — as the market remained fundamentally oversupplied in 2023.
Moreover, a combination of factors, including a weak macroeconomic environment affecting products in some regions, weighed heavily on raw material prices throughout the year.
Buyers remained largely absent for several months while adjusting to the new market dynamics, influenced by weak economic growth, which affected demand from the industrial and manufacturing sectors.
Spot demand from Chile — a key buyer of acid globally — was largely lacklustre in the first eight months of the year, which resulted in spot prices falling below the 2023 annual benchmark price of $145.50/t cfr on a midpoint basis.
Lower demand for metals owing to disappointing economic growth in China, coupled with high production costs, dampened acid consumption, as Chilean buyers relied mostly on contractual supply rather than spot purchases.
From August, the market switched to deficit owing to domestic supply outages. This led to lower availability and resulted in delivered prices rising by 56pc between August and December, attracting supply from overseas.
Another key buyer that entered the market in full swing alongside buyers in Chile was Moroccan phosphates producer OCP.
OCP — a traditional offtaker of European and Chinese acid — ramped up output in response to firm phosphate prices, switching from a margin-focused strategy to regain market share lost the previous year.
OCP's unexpected entry to the spot market led to fob spot prices rising sharply. Northwest European and Chinese fob levels rose by 192pc and 355pc, respectively, between August and September alone.
The price surge provided much-needed relief to suppliers that had faced challenging conditions earlier in the year owing to subdued demand, especially west of Suez.
Newcomers
But what was most unexpected in 2023 was the sharp increase in imports from Indonesia, providing a much-needed outlet for Chinese suppliers that had previously struggled to send shipments transpacific owing to high freight costs.
The robust import demand from Indonesia in 2023 came from metals projects including PT QMB New Energy Materials, Halmahera Persada Lygend and Tsingshan.
These buyers provided a consistent outlet for spot suppliers throughout the year, for use in their respective metals leaching operations.
Upcoming projects such as the Green Eco-Manufacture and Posco-Lygend projects are expected to add to sulphuric acid demand in 2024 on commissioning.
Indonesia is poised to have imported more than 1.2mn t of sulphuric acid in 2023, well above the 310,000t imported in 2022, driven by strong demand from nickel projects.
But acid imports are projected to fall by more than half in 2024, as new sulphur burners associated with the new capacity become operational.
Fundamentals are a-changing
Upcoming sulphur burner or smelting capacity due on line will create some fundamental changes that might disrupt sulphuric acid import demand.
In India, new sulphur-burning capacity from fertilizer producers Coromandel and Iffco is expected to lead to lower acid demand as the burners are expected to produce a combined 1.2mn t/yr of sulphuric acid when fully operational, Argus estimates.
This will create more demand for sulphur, estimated at up to 400,000 t/yr, potentially at the expense of sulphuric acid, thus affecting import dynamics for the key Indian market.
Similarly in Indonesia, it remains unclear if new capacity due on line from smelters such as PT Freeport McMoran and PT Amman in 2024 will be able to meet strong demand from the metals projects mainly based in Obi Island and Morowali.
In Morocco, OCP's sulphuric acid demand will see a short-term boost as new downstream capacity starts up. Argus estimates that acid imports will increase by 200,000t while new burners associated with the new fertilizer units become fully operational.
OCP added a new sulphur burner at the end of 2023, with the capacity to consume 417,000 t/yr of sulphur. Meanwhile a further two burners, with capacities to consume 1.1mn t/yr and 1.25mn t/yr sulphur, respectively, are under construction at the Jorf Lasfar complex.
