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Sulfuric Acid, Copper Byproduct, Peaks on Demand View, CRU Says
Jun 11,2010 16:00CST
industry news

June 11 (Bloomberg) -- Prices for sulfuric acid, used to dissolve metal ore and produce fertilizer, have peaked amid expectations of weaker demand, researcher CRU said.

The acid, the largest byproduct of copper smelting, fell to $130 a metric ton this month for immediate delivery in Chile from the year"s high of $150 in May, analyst Charles Monbiot said yesterday in an interview. Prices were at $35 at the start of 2010, according to London-based CRU.

"We think the price will soften during the second half," Monbiot said. The acid tends to move in line with copper prices, with gains for the metal triggering demand for acid from miners, who use about 15 million metric tons per year to dissolve crushed ore when producers of nickel and uranium are included.

Copper for three-month delivery has dropped 20 percent on the London Metal Exchange from April"s peak. Prices have sunk on concern that demand may slow because of steps taken by China, the world"s largest consumer, to cool its real-estate market and the potential spread in Europe of Greece"s fiscal crisis.

"If the copper price will continue to fall, the acid spot price in Chile may fall to around $80 to $90," Monbiot said. The country is the world"s biggest copper-producing nation.

Reduced global sulfur prices added to downward pressure on acid, according to Monbiot. Some users of sulfuric acid can burn sulfur instead to satisfy demand, he said.

'Demand Destruction"

"International sulfur prices are falling, and copper prices are lower," Monbiot said. "With the debt crisis in the euro zone, demand for sulfuric acid from the industry might fall, and this will lead to further demand destruction."

A smelter produces three tons of acid for every ton of copper. Reduced metal output last year stemming from the world financial crisis "led to almost a loss of 3 million tons of smelter acid," Monbiot said.

Global smelter acid production rose 1 percent last year, the least in almost two decades, Monbiot said. CRU expects growth to speed up to 6 percent this year. Acid prices surged this year because of a lack of copper ore to feed smelters and low fees paid by miners to smelters to turn ore into metal, according to Monbiot.

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