Unprecedented period for sulphuric acid

The sulphuric acid market is going through an uprecedented period. Supply and demand are disrupted by a range of factors, while logistics through the Strait of Hormuz remains largely blocked, with just one sulphur vessel transitting yesterday. This is contributing to a sharp rise in FOB, freight and CFR values.

The pressure is being felt by every participant along the supply chain.

I am still in China and did not attend Cesco, but sulphuric acid was clearly the talk of the town. I have been asked the same questions repeatedly this week by those who attended, so I want to share my views.

Why are sulphuric acid prices rising?

FOB prices are moving higher, mainly due to China’s restrictions on sulphuric acid exports. The loss of Chinese acid is drawing sporadic tonnes into the spot market at very high prices. The US, India west coast, Europe and South Korea have all sold material.

Consequently, CFR price indications in Chile have moved higher. Upcoming spot deals are also expected to move up.

Are African copper producers doing well?

I saw a post on Linkedin suggesting that consensus at Cesco was that the DRC is doing fine, with no acid shortages yet.

I know both the acid and DRC markets reasonably well, and I would say that statement is extremely wrong.

The DRC is running out of acid, and operations are at risk of closure.

Copper producers’ willingness to pay more for sulphur in the DRC than in other regions should not be mistaken for them being in a comfortable position. They do benefit from lower copper production costs and stronger end-product prices, but they also face acid shortages.

The country relies on acid from Zambia, where production has been depressed for an extended period, forcing the DRC to use more sulphur to produce its own sulphur-based acid.

Sulphur stocks in the DRC are dwindling, and any fuel shortage would immediately disrupt sulphur supply from ports such as Dar es Salaam, as well as copper and cobalt exports out of the DRC.

In addition, the Zambian government has recently announced a partial sulphuric acid export ban, requiring market participants to apply for export permits that may or may not be granted.

The DRC is highly complex. There are dozens of sulphur burners sourcing material from multiple ports located far from inland operations, each with different volumes and procurement methods. The system functions like a conveyor belt. When sulphur is abruptly removed, or effectively held up in the strait, the entire system breaks down. That is what we are dealing with now. The sulphur reported at very high prices is not arriving today, but only in the next one to two months.