The US sulphuric acid market is expected to see weak demand for vessel imports in the second half of 2017, with domestic supply primed for a rebound after a round of first-half maintenance.
Import volumes by vessel have declined by 15pc year-over-year despite the tighter domestic supply during the first half. Vessel imports from January-May totaled 174,000t, with spot volumes accounting for a minimal amount, according to customs data.
The US consumes a mix of domestic US production, rail imports from Canada and Mexico, and imports from offshore suppliers by vessel. Canadian imports have been steady, dropping by only 2pc year-over-year at 833,000t from January-May. Mexican imports dropped by 28pc over the same period at 208,000t because of miner MM Boleo ramping up consumption.
Vessel import prices have been fairly steady in the US over the first half, slowly picking up to $45-$55/t cfr from $30-$38/t cfr in January.
The decrease in US imports has come amid strong pricing in South America, which has given European producers higher netbacks. Since January, the midpoint of prices in Chile has increased by $41/t to $78.50/t cfr. Brazil spot prices have risen by $31/t to $75/t cfr. The US midpoint is only up by $16/t at $50/t cfr.
The US enjoys freight advantage over Chile and Brazil. Freight from Northwest Europe, the leading supplier by vessel to the US, is around $24/t, compared with $32/t to Brazil and $47/t to Chile. Despite the freight discount, netbacks for European producers are currently $5.50/t higher to Chile than the US, and $17/t higher in Brazil.
These higher netbacks suggest US prices need to adjust to the level of South America before sellers would act. US buyers have not needed to test the market recently, but notional indications and offers have pushed prices above $50/t cfr. But prices would need to approach $60/t cfr to compete with Brazilian and Chilean netbacks.
The domestic North American sulphuric acid market has seen tight supply on planned maintenance at several leading producers, including Kennecott, NorFalco's suppliers, Vale, Interoceanic and ASARCO. The second half of the year has begun with almost all of the planned work completed, but strong seasonal demand will keep the market tight going into the fall.
Demand has strengthened in the west, with vine-kill season ongoing in the northwest and agricultural demand in California picking up over the summer in line with normal seasonal trends. Elsewhere, industrial demand has been steady and the tightness is more supply-driven.
The lack of activity amid low supply in the first half of the year suggests little vessel import activity is likely in the second half. Stronger supply, with the vast majority of the work completed, should keep the market covered with demand expected to be stable.
