How long can the hot sulfuric acid market last?

Benefiting from the strong demand in the downstream fertilizer industry and the rapid increase in the price of imported sulfur, the price of sulfuric acid has continued to rise since the second half of 2020, and has accelerated since July this year. The average price of smelted sulfuric acid in East China has increased from a minimum of 100 CNY/ton in 2020 ( Prices in other regions have mostly fallen to negative values) rose to 800 CNY/ton, reaching the highest level since 2011. The market is extremely polarized. For this reason, the author will discuss some views on the current market from the perspective of sulfuric acid supply.

1. The domestic sulphuric acid market supply has increased steadily

 According to the statistics of China Sulfuric Acid Industry Association, as of 2020, my country's sulfuric acid industry has a production capacity of 125 million tons, an output of 98.59 million tons, and a capacity utilization rate of 79%. From the supply side, the mainstream domestic sulfuric acid production processes include sulfur-burning sulphuric acid production, smelting sulphuric acid production and pyrite sulphuric acid production. Among them, sulphur-burning sulphuric acid production capacity accounts for 44% and smelting sulphuric acid production accounts for 36%, which are the most important. In the two processes, pyrite acid accounts for approximately 17.8% of the output.

According to statistics from the National Bureau of Statistics, my country's sulfuric acid production (100% equivalent) from January to July this year was 53.705 million tons, a cumulative increase of 8.5% over the same period last year. Among them: In terms of sulphur-burning sulphuric acid production, because the domestic sulphur production cannot meet the demand, about 80% of the raw materials need to be imported from abroad every year, with the UAE, Saudi Arabia and other Middle Eastern countries as well as Japan and South Korea as the main sources of imports. Since last year, dragged down by the epidemic, the operating rate of overseas refineries has plummeted, making overseas sulfur supplies tight, and China's sulfur imports have declined accordingly. The imported sulfur for the whole year of 2020 is 8.54 million tons, which is 27% lower than the 11.73 million tons in 2019. . From January to July in 2021, 4.77 million tons of various sulfur were imported, a year-on-year decrease of 5%, and the import value was US$870 million by 136%. Coupled with the continuous increase in global ocean freight, it has further pushed up the price of sulfur imports. The current sulfur price has risen from 870 CNY/ton in early 2021 to the current 1,900 CNY/ton, an increase of 118%.

In terms of smelting acid, domestic Copper, Lead, zinc, and Nickel smelting process will produce sulfuric acid, the specific ratio is: 1 ton of copper by-product 3.5 tons of acid, 1 ton of lead by-product 1 ton of acid, 1 ton of zinc by-product 2 tons Acid and 1 ton of nickel are by-produced 7 tons of acid (nickel sulfide concentrate). Since the beginning of this year, the domestic copper, lead, zinc, and nickel smelting output has maintained an overall growth. According to the statistics of the association, the cumulative output of ten non-ferrous metals from January to July 2021 reached 37.866 million tons, an increase of 10.48% year-on-year, of which the output of refined copper was 599,000 tons. A year-on-year increase of 12.06%; lead output was 4.12 million tons, a year-on-year increase of 18.55%; zinc output was 3.84 million tons, a year-on-year increase of 6.35%; nickel output was 160,000 tons, a year-on-year increase of 11.31%.

Therefore, on the whole, the current supply bottleneck of sulfuric acid mainly comes from the decrease in imported sulfur and the increase in the cost of sulfur-based sulphuric acid caused by the high price of imported sulfur.

2. The downstream acid industry has strong demand

 In the downstream demand for sulfuric acid, phosphate fertilizer accounts for the largest proportion. According to statistics from the China Sulfuric Acid Industry Association, in my country's sulfuric acid consumption structure in 2020, phosphate fertilizers account for 51.9% of acid consumption, of which monoammonium phosphate and diammonium phosphate account for about 39.8% of sulfuric acid consumption. In addition, sulfuric acid titanium dioxide accounts for 12.4% of sulfuric acid consumption.

Since last year, global crop prices have been in an upward cycle, crop planting areas have increased, and there has been a strong global demand for chemical fertilizers. According to relevant research data, the current export price of China's diammonium phosphate has risen to US$620-625/ton FOB; the export price of monoammonium phosphate is US$535-550/ton FOB. On the whole, the supply of phosphate fertilizer is tight. One of the reasons for this situation is that the export volume of phosphate fertilizer in my country this year has increased significantly compared with the same period last year. According to relevant data, the export volume of monoammonium phosphate from January to July this year increased by nearly 80% year-on-year, and the export volume of diammonium phosphate also increased significantly year-on-year. In addition, from January to July this year, the export of phosphate fertilizer was 6.78 million tons, an increase of 59.8% from the 4.24 million tons in the same period in 2020, accounting for 42% of the total domestic output and the highest export volume in history. In the near future, in order to give priority to ensuring the domestic autumn fertilizer market supply, major domestic phosphate fertilizer manufacturers have suspended or temporarily suspended exports. It is expected that the domestic supply situation will improve after the export slowdown.

Three, outlook

1. Domestic sulfuric acid supply is expected to continue to increase. Judging from the current progress of domestic copper, lead and zinc smelting projects, between 2021 and 2022, the domestic copper smelting (mineral) production capacity will increase by approximately 980,000 tons, and the zinc smelting (mineral) production capacity will increase by approximately 200,000 tons. 3.5-4 million tons. Coupled with the gradual improvement in global sulfur supply, the tight supply situation in the sulfuric acid market will improve significantly in the second half of the year or the first half of next year.

2. The pressure on domestic downstream phosphate fertilizer supply will gradually ease. Recently, under the influence of policy signals such as the National Development and Reform Commission’s talks with key fertilizer operators and the Market Supervision Bureau’s investigation of fertilizer companies suspected of driving up prices, domestic ammonium phosphate manufacturers have temporarily suspended export orders and will maintain supply and stable prices in the domestic market as current production The top priority of management. Therefore, it is expected that with the increase in domestic supply and the increase in the operating rate of phosphate fertilizer enterprises, the domestic phosphate fertilizer supply will gradually be abundant, and the demand for phosphate fertilizer or the peak value will fall during the year.

Fourth, relevant suggestions

 The current sulphuric acid price has risen sharply. There are imported inflation factors, and the uncoordinated and inadequate structural contradictions between industries caused by the rapid development of upstream and downstream industries after decades of inevitably appear. In the long run, further restrictions on the use of phosphate and compound fertilizers (chemical fertilizers) in the world will inevitably lead to the shrinking of my country’s main acid-using industries, thereby directly reducing demand. The urgent need of my country's ecological and environmental protection management has promoted the continuous increase of comprehensive recovery of sulfur resources in all walks of life. Therefore, the upstream and downstream should proceed from the overall situation of maintaining industrial safety and coordinated development, strengthen the coordination of the upstream and downstream chains of the industry, advocate the construction of a long-term mechanism for upstream and downstream supply and consumption, and strengthen cooperation in industrial development planning and research, industrial structure adjustment suggestions, etc., to jointly promote the industry. Coordinated downstream development.