LONDON, Mar. 9 -- The value of sulfuric acid, used to dissolve metal ore and produce fertilizer, has gone from worthless to "crazy" this year, increasing costs for mining companies, London-based researcher CRU Group said.
"It all changed very quickly," Joanne Peacock, an analyst at CRU, said in an interview in London today. "Fertilizer demand was suddenly much stronger than expected."
Rebounding market rates for the acid, a byproduct of copper processing, to more than $100 a metric ton may help smelters of the metal to boost output as they can profit from the sale of the residue. Stockholm-based Boliden AB was among operators that previously cited the slump in prices as part of the reason for curbing output. Miners, though, face rising costs, Peacock said.
Demand from fertilizer makers, normally about half of world sulfuric acid consumption, has risen as higher prices for their products prompted companies to rebuild stocks, Peacock said. "It's all gone crazy," she wrote in a separate e-mail today.
Supply from metal smelters, oil refineries and burning elemental sulfur couldn't keep up, she said.
"The availability of sulfur has been much lower than expected," Peacock said. "The refineries haven't been able to increase their operating rates to full capacity yet because the U.S. consumer is not buying as much diesel and gas."
U.S. oil refineries operated at 81.9 percent capacity in the week ended Feb. 26, according to the latest data from the U.S. Energy Department released March 3. This time last year it was 83.14 percent and in 2008 output was 85.19 percent.
Surging market prices for acid will probably be temporary as demand dies down, Peacock said. "I still see the underlying demand picture as fundamentally weak and this situation may not last beyond the first half of this year," she said.
Fertilizer demand fell to its weakest in five years in 2009 as economic crisis and the credit crunch hurt farmers, according to CRU. Annual contract prices for this year fell to about $30- $60 a ton, from $110-$140 in 2009, Peacock said in December.
Sulfuric acid demand, typically about 200 million tons a year, will probably increase from 2009, though is unlikely to reach levels before the economic crisis in 2008, she said.