Viewpoint: No sign of slack in NorthAm sulphuric acid

Tight production and healthy demand have spurred US sulphuric acid prices to historic highs in 2018, with a rising market likely to continue for the rest of the third quarter.

Demand increases are possible in the second half of 2018, with Unity Envirotech's ammonium sulfate plant in Illinois likely to increase consumption after several delays in reaching full production rates during the first half of the year. Excelsior Mining's mine in Gunnison, Arizona, has also received all of its operating permits to get into copper production, although it does not appear the company has booked sulphuric acid yet. The project is expected to consume around 100,000 t/yr initially.

Production should be more consistent after the unplanned outages of the first half of 2018, although lower output from Vale's smelter in Ontario is expected to continue for the second half of this year. Veolia has delayed its maintenance in Burnside, Louisiana, to 2019, which will keep its production in the market for the second half of this year.

Kennecott's production in Utah recovered to full rates by early 2018 and it has since maintained healthy rates. Vale's production in Ontario is expected to increase to around 550,000-600,000 t/yrin 2019 as this year has been reduced by feed constraints and changes associated with the project. This year's forecast for Vale output remains around 350,000t.

Producers are still rebuilding inventory and demand is unlikely to decrease with higher prices continuing in downstream copper and fertilizer markets. Imports have been coming in from as far as East Asia, illustrating the tight international supply and strong domestic demand.

US sulphuric acid import prices are at the highest level since Argus began assessing a range in 2012, and are at $105-$110/t cfr as of 19 July. US importers have looked to offshore supply because of the tight domestic market. While production should improve in the second half of the year, producers are still operating at low inventories and any unplanned issue could lead to immediate prompt demand amid a tight international market — with associated upward pressure on prices.

Unplanned issues have impacted sulphuric acid production in every region in the US and in Canada. A fatality at the 1mn t/yr Kennecott mine in Utah in late-2017 led to a temporary shutdown at the leading western US producer. Vale's facility in Ontario has been producing around half of its previous 700,000 t/yr after a transition to a single furnace.

Other issues have impacted producers on a shorter term basis in Alabama, Arizona, Louisiana and Texas, all of which have led to increased domestic spot activity and pushed market participants into the offshore market. Mosaic in Florida, usually a sulphur buyer, also turned to the offshore sulphuric acid market to cover its requirements after an issue at its sulphur melter earlier this year.

The international market has also been strong, which led to high prices when the US market needed tonnes. OCP in Morocco has been importing well above its historical level in the last two years as it expands its fertilizer production, while Chilean demand strengthened this year as copper prices have improved.

The North American market is as strong as it has been in years for sulphuric acid, with high offshore prices and low inventories at suppliers after maintenance. The rising trend should maintain for the rest of 2018, with demand expected to continue and suppliers still catching up after the challenges of the first half.