US acid supply expected to increase in 2021

After a year of lengthy production outages, US sulphuric acid supply appears likely to expand in 2021 amid growing economic activity and rising output from Rio Tinto's Kennecott smelter.

Market participants consulted in recent weeks expect acid supply to increase by the start of next year as economic activity steadily rises following a year of Covid-19-related disruptions. The Kennecott smelter, a major supplier of sulphuric acid for fertilizer production in the western US, is expected to increase its output by December.

An earthquake in March damaged the smelter, further tightening acid supply in the western US, where an October 2019 strike at Grupo Mexico-owned metals smelter Asarco had already reduced acid availability. The union in July agreed to return to work.

The impact of expanded domestic acid supply on importers remains uncertain, mostly because it is unclear how rapidly Kennecott or Asarco will ramp up metals production. Kennecott alone has a production capacity of more than 1mn t/yr of acid, although US acid imports grew significantly in the first half of the year, spurred by cheap acid abroad and constricted domestic supply. The US imported 2.05mn t from Jan-July, up by 19pc from the same period last year.

The lifting of local and state lockdowns in the US has spurred economic activity, which in turn has driven sulphuric acid demand from manufacturing sectors and refineries. Import pricing has steadily risen since the second week of April, with the high end of the assessed price range more than doubling since then to $51/t cfr, although that is still below year-ago prices when the high end of the range was $80/t cfr.

By Reggie Thompson