Sulfuric acid, the biggest by-product of copper smelting, may trade near zero on the spot market for the rest of this year because of a slump in demand from customers such as fertiliser makers, CRU Group said.
The acid sold above $450 a tonne in the spot market in the middle of last year, the London-based research company said. Prices fell as the US, Europe and Japan entered simultaneous recessions and demand shrank to a five-year low.
“Zero, or close to zero, is still the spot price,” Joanne Peacock, a sulfuric acid analyst at CRU, said by phone yesterday. “Based on the current outlook for demand, it is more or less the same picture for the rest of the year.”
The plunge in prices is curbing the profitability of some copper producers, compounding a drop in some charges for processing metal. The excess supply has spurred some refiners to store acid on ships at sea and prompted Xstrata to suspend a smelter in Canada this month.
Demand from fertiliser manufacturers, who use the commodity to make phosphate fertiliser, has dropped about 30 per cent this year, CRU estimates. The industry normally accounts for over 50 per cent of consumption.
The acid is also produced by the zinc, lead and nickel industries, which together with copper generate 55 million tonnes of the liquid a year.
A copper smelter produces 3 tonnes of acid for every tonne of metal made. Weak demand for acid has been cited by metals producers such as Stockholm-based Boliden AB as a contributory factor in them shutting production.
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“Unless there is a sudden pickup in acid demand, there is a risk for many more acid-related smelter production cuts in the months ahead,” Barclays Capital said in a report April 2. The bank expects copper demand to shrink 2.1 per cent this year, compared with a 1.3 per cent drop in production.
Lower acid prices are benefiting some companies. Miners use the commodity to dissolve crushed ore, consuming about 10 million tonnes a year, according to CRU.