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Demand Disruption Witnesses in Global Sulphuric Acid Amid Slow Market offtakes
Demand Disruption Witnesses in Global Sulphuric Acid Amid Slow Market offtakes

Demand Disruption Witnesses in Global Sulphuric Acid Amid Slow Market offtakes

  • 06-Feb-2024 2:52 PM
  • Journalist: Jung Hoon

Hamburg, Germany: The global Sulphuric Acid market is currently experiencing a bearish trend, largely influenced by weakened performance in the Agrochemical sector. This downturn can be attributed to subdued demand from downstream Agrochemical enterprises, coupled with ample inventory levels meeting existing demand. Consequently, Sulphuric Acid prices are on a downward trajectory as consumption rates remain sluggish. Additionally, the Sulphur feedstock market and upstream Crude Oil market are both weak, leading to reduced operational costs for Sulphuric Acid production. Although Crude Oil prices saw a decline in the week ending on February 2nd, 2024, there was an overall upward trend observed from December 2023 to January 2024.

In the European market, the prices of Sulphuric Acid declined in the German market by 4.76% and reached USD 40/MT (FOB-Hamburg) on 2nd February 2024, due to weak demand from the downstream sectors. Hence, in response to the unfavorable market conditions for Sulphuric Acid, producers are decreasing their production rates to prevent excessive accumulation of inventory. Furthermore, the demand for Sulphuric Acid in international markets is also experiencing a decline. Regarding the spread, the gap between Sulphur and Sulphuric Acid is contracting, indicating a bearish trend in the commodity market.

Similarly, in the Asian market, the prices of Sulphuric Acid are following a downward trend. A significant contributing factor to this price drop is the Lunar New Year in February 2024. Facing the bearish sentiment in the Sulphuric Acid market, industry players are adjusting their Ex-quotations and providing offers to encourage the buyer's purchasing activities. However, despite these efforts  offers, buyers are scaling back their purchasing activities due to concerns about potential losses in the context of sluggish demand.

The incidents of attacks in the Red Sea, a critical passage responsible for approximately 12 percent of global trade, have compelled companies to confront difficult choices. Opting for the Red Sea route entails the risk of airborne strikes and an increase in insurance expenses. On the other hand, avoiding this route results in expensive delays, posing challenges for businesses navigating through these security concerns. Maritime freight prices have experienced a significant surge since mid-December, with rates tripling on the route from Asia to Europe and doubling for shipments between the Asian region and the Eastern Coast of the US, as reported by Xeneta. Therefore, an alternative route, the Cape of Good Hope is chosen to avoid the risks but increasing the freight charges. Despite the above-mentioned conditions, the prices of Sulphuric Acid are declining continuously due to the weak demand from the downstream Agrochemical enterprises.

At the same time, Sulphuric Acid rates in the Saudi Arabian market are steady at USD 58 per metric ton (Ex-Jeddah), signaling a sustained equilibrium between supply and demand. Trading activities slowed down due to substantial inventories in storage facilities, along with reduced demand from both the international and domestic markets. The ample inventory levels among storage facilities are playing a role in maintaining market stability. In the feedstock market, Sulphur prices saw a 5% decrease, resulting in a lowering of the operating costs for Sulphuric Acid. Middle Eastern suppliers are reducing their monthly contract prices, signaling subdued demand from the downstream Agrochemical sector and a surplus of Sulphur in the market. The global demand remains modest, with expectations of a continued decline in Sulphur prices. The decline in Crude Oil prices is also contributing to a reduction in energy costs. Despite these factors, Sulphuric Acid prices are steady, attributing to moderate demand from the downstream Agrochemical sector.

In the USA market, Sulphuric Acid prices underwent a significant decrease in the week ending on February 2, 2024. This decline can be attributed to a sluggish demand observed in the downstream Agrochemical sector, with existing inventory levels deemed adequate to fulfill current requirements. The Energy Information Administration (EIA) also reported reduced utilization rates at US refineries, stemming from decreased demand, further contributing to the subdued market conditions. Moreover, the price direction of Sulphuric Acid is influenced by the upstream Crude Oil and Sulphur market, both of which experienced a downward trajectory during the week, leading to decreased operational costs for the product.

As per ChemAnalyst, the prices of Sulphuric Acid are anticipated to decline further as it is expected that the Agrochemical sector might remain weak in the upcoming weeks due to the lower demand from the downstream sector. Also, the production rate for Sulphuric Acid might be reduced further to avoid any more pilling of the inventories.

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