Sulfuric Acid dissolves profits too

Implications: Demand for sulfuric acid continues to grow in fertilizer and metals applications.  As prices skyrocket ethanol producers are finding their margins squeezed.  Sustained demand for acid in Ag and mining sectors may keep sulfuric acid prices at or above current levels for the foreseeable future.

Analysis: Coupled with high corn prices the economic model for ethanol profits has evaporated under pressure from chemical feedstock costs.   A  One-Million gallon ethanol plant uses 2000 tons of sulfuric acid, 1000 tons of caustic soda, 5000 tons of urea, and 600 tons of anhydrous ammonia per year.  Prices for the acid have doubled [and in the case of ammonia tripled] since 2002.  Demand for fertilizer in agricultural markets has driven this cost increase; over 60% of global sulfuric acid capacity is consumed in phosphorus fertilizer production.   Compounding the fertilizer effect is demand from metals mining where sulfuric acid is used in ore leaching extraction.

New sulfuric acid capacity is the obvious answer but large scale plant construction and long lead-time equipment orders dictate 12-24 month planning horizons for bringing new production on line.  The short term focus will be on upkeep and de-bottlenecking of existing acid plants; every incremental ton of acid will help relieve the supply gap but expectations for immediate price relief are likely wishful thinking.