Sulfuric Acid Shortage
I found this September story on Sulfuric acid. Our plant manager had a meeting with a supplier that told him the spot acid price is now $300/ton!!!! We were paying $58/ton delivered 18 months ago. The supplier said ethanol plants, fertilizer producers, and "remote" mining companies are all running short on acid. Make sure you understand supply positions if you own companies that are large sulfuric acid consumers!
Sulfuric acid is suddenly scarce and expensive
Increased demand for biofuels like ethanol tighten supply of sulfuric acid for chemical buyers.
By Gordon Graff -- Purchasing, 9/13/2007
Vigorous demand, a static supply and declining imports have combined to drive up U.S. sulfuric acid prices for much of this year. And market watchers say these conditions are likely to continue for at least another year.
Not only is sulfuric acid supply tight, but there is a scarcity of railcars to deliver the chemical, prompting concern among some buyers.
Agriculture and metals processing are the two hottest markets for sulfuric acid right now. Roughly 60% of sulfuric acid produced goes into agriculture, primarily in the manufacture of phosphate fertilizers. The biofuels boom, particularly the proliferation of ethanol plants, is having a "double effect" on the demand for sulfuric acid, says Paul Bacon, business director at Rhodia Eco Services, a French sulfuric acid producer. First, he notes, there is the need for more fertilizer to grow corn, which is the ultimate source of most fermentation ethanol. In addition, he says that ethanol plants consume sulfuric acid in their own processing operations. In fact, each new ethanol plant requires anywhere from 2,000–4,000 tons of sulfuric each year, according to Marsulex, a Toronto-based sulfuric acid producer.
Outside the U.S., there is a swelling demand for agricultural fertilizers in China and India. Traditionally, says Bacon, fertilizer makers in these countries have produced their own sulfuric acid. But their needs have outstripped their production capacity, he adds, so they are increasingly importing the acid, further boosting demand for sulfuric.
Meanwhile, the "global boom in construction" has stepped up purchases and prices of such metals as copper and nickel, says Bacon, and production of such metals consumes sulfuric acid in ore leaching processes. While smelting of nonferrous metals yields sulfuric acid as a byproduct, metals producers now need more sulfuric than they can produce internally, Bacon notes, forcing them to buy the acid to address the shortfall. And with copper prices at three times their historical averages, metals companies are willing and able to pay "a lot more" for sulfuric than they were a few years ago, Bacon says.
In other markets, Bacon sees current growth for sulfuric acid in gasoline production and petrochemical processing roughly paralleling GDP.
As for sulfuric acid supply, there has been a "dramatic decrease in production facilities" of the acid over the past five to seven years, says Key Compton, president of sulfuric producer Southern States Chemical, based in Savannah, Ga. The shutdowns, he adds, are a legacy of an "oversupplied market" for sulfuric acid, plus relatively anemic sulfuric acid prices, which didn't perk up until early this year. In fact, as late as November 2006, GenTek said it would close its Newark, N.J. sulfuric acid facility due to "adverse market conditions."
Strong fertilizer and metals markets, capacity limits, and costlier sulfur are poised to push sulfuric prices into even higher regimes.
Despite the recent pickup in demand, there is little or no new capacity on tap for sulfuric acid, says chemicals analyst Trey Hamblet of Industrial Information Resources in Sugarland, Texas, which tracks plant construction. Of about $89 million in sulfuric project activity in the U.S. this year, he notes, the "vast majority" of the funds are earmarked for planned maintenance and turnaround, rather than expanded production capacity.
In the past, U.S. buyers of sulfuric acid would have turned to foreign suppliers when there wasn't enough domestic product to go around. But foreign suppliers are now bypassing the U.S., Compton says, because of more attractive sulfuric acid pricing environments in other countries. This fact, coupled with scheduled shutdowns at some U.S. plants for maintenance, could lead to "a serious shortfall" of sulfuric in the fourth quarter of this year, he adds. To deal with this situation, Compton says his company is giving top priority to meeting its delivery commitments to its existing sulfuric customers, and is "unable to assist" new customers, particularly those from outside its core market region in the Southern states.
But constrained supply isn't the only problem besetting buyers of sulfuric acid. Transportation, particularly a shortage of railcars, has become an issue. For example, major fertilizer maker Martin Midstream Partners in Kilgore, Texas complained last year that its deliveries of sulfuric acid by rail had been "inconsistent" over the preceding two or three years. To alleviate that headache, the company recently completed a new sulfuric acid plant at its Plainview, Texas fertilizer facility. That unit will supply all the plant's sulfuric needs, and create enough excess to sell into the merchant market.
In response to escalating demand and limited supplies, price tags of sulfuric acid have reached record highs in the past few months (see chart). Also driving the rises is more expensive sulfur, a key sulfuric acid raw material. Looking ahead through the end of 2008, Compton says, "I do not see anything that is likely to change" the supply, demand and raw materials picture in sulfuric. Eventually, he adds, higher U.S. tags for sulfuric may attract more imports and put a cap on domestic price hikes. But for the near-term, particularly around the end of this year, he says, domestic customers "may be paying prices for sulfuric acid that they've never seen before."
