For decades, sulphuric acid (H2
SO
4) has been one of the most important basic substances in the chemical industry worldwide. The magnitude of the demand for sulphuric acid is considered an indicator of a country's industrial development - after all, numerous everyday products cannot be produced efficiently without sulphuric acid.
In April 2021, we already reported on the lack of availability of sulphuric acid. The background to the shortage at that time was the reduced outputs of liquid sulphur, which serves as an essential raw material for the production of sulphuric acid. At the same time, demand was high because almost all relevant productions were running at full speed. Fertilisers, semiconductors, surfactants, paper, plastics and dyestuffs are just a small selection of products made by using sulphuric acid.
Today, almost two years later, the tense economic situation in Europe is very much felt by sulphuric acid buyers as well as producers. The most important aspects of the current market dynamics are summarised below.
Customers sell sulphuric acid at dumping prices
Due to the enormous energy price increases, many sulphuric acid customers have cut back or stopped their production. At the same time, numerous manufacturers who use sulphuric acid as an intermediate product are dumping their stocks on the market. In anticipation of a boom, many filled up their stocks completely. However, the expected upswing failed to materialise, especially in the construction industry.
As a result, the warehouses remained full and now people are trying to get rid of the goods on the market at the lowest possible prices. However, this trend will only last for a short time. As soon as production starts up again, producers will use their sulphuric acid stocks almost exclusively for their own needs. As a result, the available quantity on the free market will again decrease significantly.
Assuming appropriate energy price caps and support measures by governments, however, the tense situation should ease again by the 2nd quarter of 2023 at the latest.
High cost pressure on sulphuric acid producers
Already in 2022, there were declines in production of products whose manufacture is highly dependent on natural gas. In addition to sulphuric acid, this also affects electrolysis and nitrogen products. The global supply of sulphuric acid is now insufficient due to the closure of several plants. A persistent shortage would lead to serious impacts in the industry.
Another driver of the current market dynamics is the conflict between Russia and Ukraine, which has a significant impact on the market price of sulphuric acid. The cost of producing upstream raw materials for sulphuric acid has increased as a result of the sharp rise in global crude oil prices. The upstream cost pressure is therefore now greater.
Rising demand for sulphuric acid
The sulphuric acid industry as a whole has undergone structural changes. Fertiliser demand has increased in recent years due to increased production of ammonium sulphate, diammonium phosphate and other fertilisers. Sulphuric acid is also increasingly used in car batteries and in mining.
In the chemical industry, sulphuric acid is used extensively for various applications such as the production of nylon or detergents. In addition, the demand for high-purity sulphuric acid is increasing due to its growing use in the semiconductor and pharmaceutical industries.
Conclusion: Energy prices hamper growth of the sulphuric acid market
Rising demand for sulphuric acid in downstream chemical and industrial applications and increasing application in the agricultural sector are key factors driving demand in the global sulphuric acid market. At the same time, high energy prices are hampering market growth and leading to a tight supply situation. Effective measures in the energy sector on the part of governments are required to secure the availability of sulphuric acid.
As the market leader for the production of high-purity sulphuric acid in Austria, Donau Chemie AG relies on long-term partnerships in the procurement of raw materials. With two production plants in the Pischelsdorf industrial park, we are also able to guarantee a continuous and reliable supply to our customers.