Sulphuric acid sweetened by fertile market outlook

Sulphuric acid is a cyclical commodity. Production of this intermediate product, consumed by myriad markets in the manufacture of high value goods, is often cited as being the best indication of a country’s industrial wealth and activity.

This is because production of sulphur-in-all-forms (including sulphuric acid) is primarily driven by demand for base metals and hydrocarbons, as the manufacture of these commodities also produces sulphur involuntarily.

Involuntary production of any commodity essentially means that its availability is not fully driven by its own consuming markets. In the case of sulphuric acid, its availability is prone to erratic swings in oversupply and undersupply (in addition to eye-watering price cycles) depending on the ratio between production and consumption.

The sulphuric acid market has seen tremendous turnaround in the past two years. Perhaps most illustrative of the scale of market change has been the sulphur spot price: in 2008 sulphur was being purchased for an astonishing $800/tonne but by 2009 prices actually became negative.

Sulphuric acid is the most widely used inorganic chemical with end markets including fertilisers, metal production (principally copper), petroleum, rubber, and pulp and paper.

It is also an essential component for processing a range of industrial minerals to yield vital prerequisite chemical products, eg. phosphate rock to phosphoric acid, borates to boric acid, fluorspar to hydrofluoric acid, lithium carbonate to lithium sulphate and ilmenite to titanium dioxide (see panel).

Although its applications are numerous, 65% of the chemical is used in various forms for agricultural purposes (Figure 1). Thus sulphuric acid is heavily dependent on the fortunes of the fertiliser industry Ð particularly phosphate.

The fertiliser mine to market chain has been hit hard in the past 18 months. As government focus leaped from food security to the fallout of the banking crisis, fertilisers and their raw materials became of secondary importance (IM March ’10, p.48: Forgotten fertiliser).

Likewise production of other high-value commodities Ð such as copper and petroleum Ð was scaled back as demand evaporated.

“2009 saw markets quite depressed after the highs of 2007/8 and the subsequent price crash,” Richard Hands, editor of Sulphur, told IM: “However, China has been importing sulphur and sulphuric acid quite heavily through the last half of 2009, and this is starting to send prices climbing again.”

This is good news for the industry, particularly for sulphuric acid producers who manufacture the chemical involuntarily ie. through the metal smelting process Ð as they need to sell sulphuric acid simply to clear their storage areas.

Around 205-207m. tonnes of sulphuric acid were produced in 2008. Of this, approximately 60m. tonnes were produced involuntarily principally as smelter acid from metal production (Figure 2).

In periods of oversupply or low prices, smelter acid poses a nuisance to metal producers. When sulphuric acid prices became negative in 2008, these producers were actually forced to pay consumers to take away their unwanted stock.

But now demand is returning, and with it availability is tightening. Hands explained: “A lot of mining operations virtually shut down at the start of the crash, but are back into production again. Farmers stopped buying phosphate fertiliser when prices were sky-high but are now back in the market, so fertiliser producers are running at higher operation rates.”

Fertiliser

Around 65% of total sulphuric acid production is used for agriculture, with phosphoric acid production being the primary component of this (Figure 3). Sulphuric acid is used to convert phosphate rock to phosphoric acid which itself is used in the production of phosphate fertilisers, such as diammonium phosphate.

In this process, phosphate rock is acidulated using sulphuric acid. The sulphuric acid reacts with calcium in the phosphate rock, forming gypsum. As gypsum is not removed from superphosphate, around 12% of the fertiliser comprises sulphur. Sulphur can also be removed to produce a higher nutrient phosphate-based fertiliser.

Some sulphur-based fertilisers such as ammonium sulphate use sulphuric acid in their manufacture. Ammonium nitrate-sulphate is also made by granulating ammonium sulphate with ammonium nitrate or neutralising sulphuric acid with ammonia in ammonium nitrate solution.

Moreover, sulphur is an important plant nutrient in its own right. Richard Hands told IM: “The move towards higher analysis fertilisers, such as urea and diammonium phosphate, and away from more traditional sulphur-containing fertilisers, such as ammonium sulphate and triple superphosphate, has led to sulphur deficiencies in many soils, especially in Asia.”

Cleaning up of stack gas emissions from power stations to reduce sulphur dioxide in the atmosphere (and thus acid rain) has also meant that there is less free sulphur in soils. The Sulphur Institute (TSI) believes that there is a sulphur gap in terms of plant nutrient that may be tens of millions of tonnes worldwide.

“India has recently recognised this [gap] and will now be subsidising fertiliser use in terms of nutrient content, including sulphur,” Hands revealed. “This has the potential to increase demand for sulphur-containing fertilisers, which may include those using sulphuric acid.”

Yet TSI forecasts traditional sulphur fertiliser products will not meet the increasing demand for sulphur in agriculture. TSI estimates that sulphur fertilisers provide a potential market of 9.6m. tpa sulphur consumption.

Base metals

Copper is produced through the solvent extraction-electro-winning (SX-EW) process, whereby metals from the host rock are dissolved in sulphuric acid. Another important market is nickel production, which uses sulphuric acid in the pressure acid leach process. Around 30 tonnes of sulphuric acid are needed for each tonne of nickel produced.

In total, base metals represent about 10% of acid demand. Moreover, leaching treatment of metal ores is a rapidly growing area for sulphuric acid; particularly in nickel production. “New technologies like high pressure acid leaching have the potential to transform the nickel industry,” Hands commented.

But metal markets themselves are also cyclical and production of commodities such as copper and steel has varied enormously over the past 18 months.

For example, copper for delivery in three months traded as high as $7,660/tonne at the London Metal Exchange on 6 January 2010, compared with $2,845/tonne on 24 December 2008.

“Prices are well above the cost of production to the point that the CEO of Antofagasta, Marcelo Awad, said this month that as a producer he believed the market would be more sustainable at much lower levels of between around $5,000-5,500/tonne,” Alex Harrison, non-ferrous editor of Metal Bulletin, told IM.

Copper prices have climbed strongly since being battered down to levels below $3,000/tonne in the wake of the global financial crisis on a potent combination: continuing growth in China, the world’s largest copper buyer, and investors’ move into commodities as an asset class, Harrison explained.

But what does this mean for sulphuric acid? Aker Solutions, a leading provider of engineering and construction services, told IM that leaching markets had continued to increase, although the sulphuric acid market as a whole was “improving, but still slow”.

Meanwhile Bob Braun, president of USA-based sulphuric acid pump manufacturer Chas S. Lewis & Co. Inc., revealed: “Smelting markets are coming around slowly but there are still some issues with the commodity prices being depressed.”

“For the moment the sulphuric acid market is going to stay fairly similar to the past few years. In my opinion the market is actually at the bottom of what it has been,” Braun told IM. “We hope to see some rebound towards the end of the year as the commodity pricing comes back and hopefully more activity.”

Other markets

Sulphuric acid is one of the primary chemicals used in the paper pulping process. Pulp is made by mechanically or chemically separating the fibres in wood or other cellulose materials from non-fibrous materials.

For the pulp and paper sector, 2009 was marked by a severe global recession. UPM-Kymmene, one of the world’s leading pulp and paper producers, suffered a sales fall of 18% to Û7.7bn. ($10.6bn.), which the company said had “severely impacted” the profitability of its operations.

“In 2010, the operating environment will continue to be challenging,” UPM’s president Jussi Pesonen acknowledged. “Demand recovery seems to be at hand, but the speed and strength of it is uncertain. There is still overcapacity in many of our businesses.”

Pigments

Another suffering, high-value market for sulphuric acid is in the production of the white pigment titanium dioxide (TiO₂). The world’s titanium dioxide capacity is 5.625m. tpa: of this, 45% is produced through the older sulphate route and 55% through the chloride process.

In the sulphate production route, lower grade ilmenite and titanium slag are used as feedstock. The feedstock is added to sulphuric acid, dissolved in cold water, and then filtered to remove ferrous sulphate. Once filtered the material is steam-heated to precipitate TiO₂ and the solids are calcined to produce TiO₂ pigment (TiO₂ 93-96% - see panel).

The sulphate route is slowly being phased out, however, as it is less efficient than the chloride route.

Paul Anselme, manager of the European Chemical Industry Council (CEFIC), told IM: “Sulphuric acid is used for acid digestion of the mineral ores or slags containing titanium. In this process, H₂SO₄ cannot be substituted.”

The sulphate process uses a simpler technology and can use lower grades and/or cheaper ores than those used by the chloride process. Yet the sulphate process has higher production costs and produces lower TiO₂ grades.

For TiO₂ producers, the switch to the chloride route or more often the decision to close sulphate plants is triggered by environmental and production cost considerations.

In Europe, sulphate plants are generally older and the trend is for companies to invest in extension of chloride plants rather than the renovation of old sulphate facilities, Anselme revealed.

“If savings have to be made, companies first look at sulphate plants,” he said.

The closure of sulphate plants has been seen in Europe and elsewhere following the onset of the global recession. As with any commodity, pigment demand is dependent on its end markets principally auto, construction, paint and paper all of which suffered from reduced sales last year.

Huntsman Corp.’s decision to mothball its 40,000 tpa sulphate plant in Grimsby, UK, was blamed on decreased demand for pigments during the downturn. The closure, in January 2009, was part of Huntsman’s worldwide cost-cutting initiative that included the loss of 1,175 jobs (IM March ’09, p.19: Huntsman shuts UK TiO₂ plant).

Also closed was Cristal Global’s 65,000 tpa sulphate facility in Le Havre, France. Ultimately, high operating costs including energy and raw material prices were given as the rationale behind the shutdown, although Cristal’s chloride facility in Baltimore, USA, suffered the same fate (IM July ’09, p.29: TiO₂’s time to transform).


Table 2: US sulphuric acid consumption, by use (2007)

Some sources estimate that the sulphuric acid market is in oversupply at present, while others believe that recessionary conditions have capped production of the chemical particularly involuntary production from copper smelting.

Whichever scenario is more accurate, it is fair to say that the future health of the sulphuric acid market will be tied to the performance of fertiliser, hydrocarbon and base metal markets.

Generally speaking, fertiliser is not a necessity for crops it is merely an enhancer. Although this is true on one level, it does not take into account the deficit of sulphur in soils at present. Considering the sulphur gap, fertiliser could become an ever bigger market for sulphuric acid particularly within the next few years.

For titanium dioxide markets the picture is less clear. While it is undeniable that producers are slowly changing to the chloride production route, manufacturing TiO₂ through the sulphate process enables the use of lower grade ores.

Trickier still is base metal demand. With the gradual switch to acid leaching (a consumer of sulphuric acid) over smelting (a producer) this market may start to produce less and consume more sulphuric acid.

Also likely to shake-up traditional supply chains is increased vertical integration of producer-consumer operations.

“Most large nickel and other metal leaching projects have associated sulphur-burning sulphuric acid plants,” Hands told IM. “As burning sulphur is exothermic, it can also produce electricity for the plant and even export some to local homes. The volatility of the open acid market is also a source of concern for consumers.”

Increasingly, leaching projects are choosing to build their own sulphur burning plants because the sulphur market tends to be less volatile than the sulphuric acid market.

But this must be considered against the backdrop of the global copper markets.

The move by investors into commodities, such as copper, as an asset class is based in part on forecasts about the continuing growth of China but also on strategies that involve holding contracts in industrial metals, rather than faltering paper currencies.

“In the event of a double-dip recession in the West, the bursting of an asset bubble or tightening credit in China, copper prices are vulnerable,” Harrison explained.

Otherwise many believe that there is a long-term input in the copper market: when prices fall to a certain level, there will be buying interest from a confident, expansive and developing China.


Sulphuric acid at a glance

Formula: sulphuric acid, H₂SO₄, is an inorganic mineral acid.

Properties: soluble in water at all concentrations, sulphuric acid is the most widely used inorganic chemical.

World production in 2008: between 205-207m. tonnes. Of this, around 60m. tonnes was produced involuntarily (ie. by metal smelters).

Main producers: production of sulphur-in-all-forms (including sulphuric acid) is primarily driven by demand for base metals and hydrocarbons, as producers of these commodities also produce sulphur-in-all-forms involuntarily (Table 1).

Markets: agriculture, hydrocarbon refining, base metal leaching, titanium dioxide pigments Ð plus numerous other smaller markets including rubber production and paper pulping.

Industrial minerals: numerous industrial minerals use sulphuric acid as an essential input for processing. Sulphuric acid is used with phosphate rock (phosphoric acid); potash (potassium sulphate); aluminium trihydrate (aluminium sulphate); antimony oxide (antimony sulphate); calcium bentonite (activated bentonite); beryllium hydroxide (beryllium sulphate); borates (boric acid); acid grade fluorspar (hydrofluoric acid); lithium carbonate (lithium sulphate); magnesium hydroxide (magnesium bisulphate); manganese carbonate (manganese sulphate); rare earths such as bastnasite (cerium concentrate); strontium carbonate (strontium sulphate); and ilmenite or titanium slag (titanium dioxide).

Prices: at present prices for sulphuric acid have been quoted at $120-130/tonne (Chilean landed), while Chinese prices are in the range of $60-70/tonne. Higher sulphur prices are forecast to push up sulphuric acid prices in the short-term, but this is not expected to persist.

Table 1: World sulphur production, by process

Source: US Geological Survey

Production routes for titanium dioxide

Table 3: Primary sulphuric acid markets