The US Hydrochloric Acid Prices Plunge Amidst Slow Oil and Gas Drilling Activities

USA: The price of Hydrochloric Acid dropped sharply by 7% in the US market during May 2023. This can be attributed to the sharp drop in the downstream industries' demand and the immense inventory availability. As such, there was no support from the upstream market because the price of Liquid Chlorine was also declining. The factors which were contributing to the changes in the Hydrochloric Acid prices were the decline in demand from oil and gas drilling industries and the slowdown in the steel manufacturing industries.

During the month of May 2023, the contraction in Hydrochloric Acid demand from the oil and gas drilling industries suggested that there was a steep drop in oil and gas drilling activity. According to Baker Hughes, the United States had 720 active drilling rigs during the month of May, while one month ago, the total number of active rigs was 753, and a year back, the total number of active rigs was 728, which showed a decrease in rig count.

Meanwhile, in the other downstream sector, i.e., Steel manufacturing industries, the demand for Hydrochloric Acid as a pickling agent and surface oxidation removal in steel applications has decreased drastically. The loss in steel demand came from the construction sector, which has brought US steel production down, thus reducing the offtakes of Hydrochloric Acid as well. According to the American Iron and Steel Institute (AISI), Steel production was 38,985,000 net tons in the week ending June 10, 2023, at a capability utilization rate of 75.6%, which showed a drop of 3.2%. Moreover, the capability utilization rate was 80.3 percent at that time last year when production was 40,268,000 net tons.

However, manufacturing facilities have been under pressure due to the low demand for Hydrochloric Acid, which suggests a global glut. In addition, manufacturing activity declined due to the contraction in Hydrochloric Acid orders, as evidenced by the slightly lower US Manufacturing Purchasing Managers' Index (PMI) reading of 48.4 in May 2023 compared to April 2023.

ChemAnalyst forecasted that the market for Hydrochloric Acid might remain bearish in June 2023, as there is no hope of recovery in the Steel industry's demand. However, distributors in the US market said that "there is too much acid and enough inventory in the market," which is expected to keep Hydrochloric Acid prices depressed. Simultaneously, steel manufacturers were experiencing "heavy delays" in their orders, as buyers were still hoping for a further reduction.