How long can the market price of sulfuric acid hit a 10-year high?

Benefiting from the strong demand in the downstream chemical fertilizer industry and the rapid rise in imported sulfur prices, sulphuric acid prices have continued to rise since the second half of 2020, showing a trend of acceleration after July this year. The average market price of smelting sulfuric acid in East China has risen from the lowest 100 yuan / ton in 2020 (prices in other areas have fallen to negative values) to 800 yuan / ton, reaching the highest level after 2011, and the market is polarized obviously. For this reason, the author will talk about some views on the current market from the point of view of sulfuric acid supply.

Domestic sulphuric acid market supply increases steadily

According to the statistics of China sulphuric acid industry association, by 2020, China's sulphuric 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 point of view of the supply side, the domestic mainstream sulfuric acid preparation processes include sulphuric acid production from sulfur, smelting and pyrite, of which sulphuric acid production accounts for 44% and smelting acid production accounts for 36%, which are the two most important processes. in addition, pyrite acid accounts for about 17.8% of the output.

Statistics from the National Bureau of Statistics show that from January to July this year, China produced 53.705 million tons of sulfuric acid, an increase of 8.5 percent over the same period last year. Among them, sulfur sulphuric acid production, due to domestic sulfur production can not meet the needs, about 80% of raw materials need to be imported from abroad every year, the United Arab Emirates, Saudi Arabia and other Middle Eastern countries, as well as Japan, South Korea are the main sources of imports. Since last year, due to the impact of the epidemic, the operating rate of overseas smelters has plummeted, resulting in a shortage of overseas sulfur supply and a decline in China's sulfur imports. In 2020, China imported 8.54 million tons of sulfur, 27% lower than the 11.73 million tons in 2019. From January to July 2021, China imported 4.77 million tons of sulfur, down 5 percent from the same period last year, and imports totaled US $870 million, an increase of 136 percent over the same period last year. In addition, the continued rise in global sea freight rates has further pushed up the price of sulphur imports. At present, the price of sulfur has risen from 870 yuan / ton at the beginning of 2021 to 1900 yuan / ton at present, an increase of 118%.

In terms of smelting acid, sulfuric acid is produced in the smelting process of copper, lead, zinc and nickel in China. the specific proportion is as follows: 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 of acid, 1 ton of nickel by-product 7 tons of acid (nickel sulphide concentrate). Since the beginning of this year, the domestic smelting output of copper, lead, zinc and nickel has maintained overall growth. According to the statistics of the China Nonferrous Metals Industry Association, from January to July 2021, the total output of ten non-ferrous metals reached 37.8662 million tons, an increase of 10.48 percent over the same period last year. Of this total, refined copper output was 5.999 million tons, up 12.06 percent over the same period last year; lead output was 4.12 million tons, up 18.55 percent over the same period last year; zinc output was 3.84 million tons, up 6.35 percent over the same period last year; and nickel production was 160000 tons, up 11.31 percent over the same period last year.

Generally speaking, the current supply bottleneck of sulphuric acid mainly comes from the reduction of imported sulfur and the increase in the cost of sulphuric acid production caused by the high price of imported sulfur.

The demand of downstream acid industry is exuberant.

Phosphate fertilizer accounts for the largest proportion of downstream demand for sulfuric acid. Statistics from the China sulfuric Acid Industry Association show that in China's sulphuric acid consumption structure in 2020, phosphate fertilizer accounts for 51.9% of acid consumption, of which monoammonium phosphate and diammonium phosphate account for about 39.8% of sulfuric acid consumption. In addition, titanium dioxide by sulfuric acid process accounts for 12.4% of sulfuric acid consumption.

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

Outlook for the future

First, the domestic sulphuric acid supply is expected to continue to increase. Judging from the current progress of domestic copper and lead-zinc smelting projects, from 2021 to 2022, the domestic copper smelting (mineral) production capacity increased by about 980000 tons, zinc smelting (mineral) production capacity increased by about 200000 tons, and it is estimated that the sulphuric acid production capacity can be increased by about 3.5 million-4 million tons. With the gradual improvement of the global sulfur supply, the supply tension in the sulphuric acid market will obviously improve in the second half of the year or the first half of next year.

Second, the domestic downstream phosphate fertilizer supply pressure will be gradually alleviated. Recently, under the influence of policy signals such as the National Development and Reform Commission's interviews with key chemical fertilizer enterprises and the market supervision bureau on the filing and investigation of chemical fertilizer enterprises suspected of driving up prices, domestic ammonium phosphate production enterprises have temporarily suspended export orders, taking the domestic market of ensuring supply and stable prices as the top priority of the current production and operation. Therefore, it is expected that with the growth of domestic supply and the increase of the operating rate of phosphate fertilizer enterprises, the domestic phosphate fertilizer supply will be gradually abundant, and the demand or peak value of phosphate fertilizer will decline during the year.

Relevant suggestions

At present, the price of sulfuric acid is rising sharply, which is not only caused by imported inflation, but also the inevitable manifestation of the uncoordinated and inadequate structural contradiction between upstream and downstream industries caused by decades of rapid development. In the long run, further restrictions on the use of phosphate and compound fertilizers (chemical fertilizers) in the world will inevitably lead to the shrinkage of China's main acid industry, thus directly reducing demand. The urgent need of eco-environmental protection and management in China promotes the continuous increase of comprehensive recovery of sulfur resources in various industries. Therefore, upstream and downstream enterprises should proceed from the overall situation of maintaining industrial security and coordinated development, strengthen the coordination of upstream and downstream chains, advocate the construction of long-term mechanism of supply and marketing in upstream and downstream, and strengthen cooperation in the study of industrial development planning and suggestions on industrial structure adjustment, so as to jointly promote the coordinated development of upstream and downstream industries.