Market of Sulfuric Acid

Thousands of short tons per year merchant H2SO4, 100% basis from smelter SO2 recovery in metallic ore (sulfides) roasting in the production of copper, nickel, lead, zinc, molybdenum and gold. The largest smelter operations produce copper. Smelter acid is non-discretionary production. Approximately 10 percent of the sulfuric acid market is supplied by smelter acid, the remainder coming from virgin acid (elemental sulfur burning, acid sludge burning and stack gas desulfurization) production.

The Asarco El Paso Tex. smelter was idled in February 1999 and still remains down. In April 2001, Asarco suspended operations in East Helena , Mont. The company’s Hayden , Ariz. , copper smelter remains operating but at less than 70 percent of capacity. Asarco is a subsidiary of Grupo Mexico Sa de CV.

Broken Hill Property Company ( Australia ) suspended operations at San Manuel , Ariz. in 1999. The plant, with its 1,300 thousand tons of acid capacity is still down.

In October 1999, Phelps Dodge Corporation acquired Cyprus Amax Minerals Company with its smelter (Cyprus Climax Metals) in Ft. Madison Iowa. The property now operates as Climax Molybdenum Company. Chino Mines Company is owned 67 percent by Phelps Dodge Mining Company and 33 percent by Heisei Minerals Corporation. In 2002, Phelps Dodge announced a restructuring plan that included suspension of operations at the Chino open pit mine and smelter.

Newmont Gold is a subsidiary of Newmont Mining Corporation.

Pasimco Ltd. (Austrailia) reportedly is trying to shed certain assets, including the zinc refinery in Clarkesville , Tenn. , along with two mines. No buyer has been announced.

In mid 2001, DuPont redeemed its 50 percent interest in Noranda DuPont LLC. The company, a joint venture between DuPont, Noranda Inc. and Falconbridge Limited, was established in 1998 to market, transport and distribute in North America sulfuric acid produced by all three companies. The JV was renamed NorFalco LLC. Noranda and Falconbridge operate six smelter sulfuric acid plants in Canada , with a combined installed capacity of 2,565 thousand tons. This is about 40 percent of the total Canadian smelter acid capacity. Noranda holds the majority stake in Falconbridge.

Profile last published 10/4/99 ; this revision 2/10/03 .

DEMAND

2001: 44.0 million short tons; 2002: 44.6 million short tons; 2006: 46.2 million short tons, projected. Demand equals production plus imports (2001: 1,522 thousand short tons; 2002: 1,056 thousand short tons) less exports (2001: 230 thousand short tons; 2002: 161 thousand short tons).

GROWTH

Historical (1997 – 2002): – 1.1 (negative) percent per year; future: 0.9 percent per year through 2006.

PRICE

Historical (1997 – 2002): High, $55 per ton, smelter acid, 100 percent basis, tanks, Gulf, works; low, $23 per ton, same basis. Current: $55 to 65 per ton, same basis.

USES

Fertilizers, 70 percent; mining, 9 percent; petroleum alkylation, 6 percent; inorganic chemicals and pigments, 5 percent; pulp and paper, 3 percent; organic chemicals, 1 percent; rubber and plastics, 1 percent; water treatment, 1 percent; miscellaneous, 4 percent.

STRENGTH

Sulfuric acid supply has tightened considerably during the second half of last year, placing upward pricing pressure in most markets. Canadian and US smelter capacity curtailment and increased fertilizer operating rates have pushed up sulfur pricing, which in turn has raised the price of sulfuric acid. Canada ’s exports (all smelter acid) to the US were down by 500 thousand tons last year, contributing to the market tightness. At the same time, the phosphate fertilizer segment, which consumes 70 percent of produced sulfuric acid, has improved. In recent years fertilizer production has been declining, but 2003 should be a turn around year for phosphate fertilizers. The industrial segments should hold steady, with no appreciable growth or decline.

WEAKNESS

The current market situation is exhibiting unusual characteristics. The merchant sulfuric acid market, which accounts for approximately 28 percent of demand, has been flat, if not declining, for several years past. In recent years, about one million tons of merchant market demand have been supplied by US smelter acid and another 1.6 million tons from Canadian smelter acid. The balance of smelter acid produced is consumed internally for ore leaching.

The sluggish copper market, however, continues to hamper the smelter acid segment. Low copper prices due to an oversupply of copper built up during the Asian economic crisis and increased global production have forced the domestic copper market to rationalize. With the temporary closure of four major US copper smelters since 1999, more than 2.7 million tons (about 60 percent) of sulfuric acid capacity have been taken out of the market.

OUTLOOK

The sulfuric acid business is benefiting from a tight market with improved prices. This situation should continue, as the economy is anticipated to turn around this year which will improve demand. The supply side could see some relief if metal prices increase enough to improve smelter operating rates, but this probably will not occur until 2004 at the earliest. Annual growth for sulfuric acid over the forecast period is projected to be 0.9 percent per year.