US HCl market sees price-increase intiatives

The market collapsed in 2015 as oil and gas drilling activity removed perhaps one-third of demand for the acid. Above, Skyonic’s hydrochloric acid plant in San Antonio, Texas, recycles carbon dioxide from a neighbouring concrete plant to produce HCl and sodium bicarbonate. (Courtesy of Skyonic)

Focus article by Bill Bowen

HOUSTON (ICIS)–The US hydrochloric (HCl) acid market showed signs of life this week as producers and distributors announced proposed price increases, the first in 19 months, market sources confirmed on Wednesday.

Reagent, the largest US distributor of HCl, was first to announce late last week, according to market participants. It said it would seek an increase of $25/wet ton.

Five other distributors, producers and makers of HCl as a by-product have made separate announcements as of Wednesday afternoon. Most are heard to range from $20-30/wet ton for 22-degree Baume material, a solution of 2:1 water to hydrogen chloride.

Whether the increase will have much impact on prices is another question. Because most HCl is sold under long-term contracts – many of one to three years duration – the impact of the proposed increases will be blunted.

One distributor estimated that 15-25% of HCl sales are conducted outside of contract provisions.

Producers are citing a number of reasons for the proposed increases, including the end of peak refrigerant-producing season and the end of acid production as a by-product of coolant production.

Additionally, a Honeywell plant in Geismar, Lousiana, which makes refrigerants and had been suffering production problems already, was debilitated during the heavy rains and flooding in that region in August. Company officials were unavailable Wednesday afternoon to confirm whether the plant is back operating.  

Acid output also has been reduced by a 30-day planned maintenance at a Covestro facility, which makes acid as a by-product of isocyanate production.

Market participants said that it is too early to tell whether the increases will gain traction in the market, but are glad of any sign that prices might move off of their recent floor.

The US HCl market collapsed in 2015 as drilling activity removed perhaps one-third of US demand for the acid.

Drilling activity hit a bottom in May and has begun to tick higher as oil prices recover, though at a painfully slow rate given the depths of its collapse.

“They won’t start drilling again until oil hits $55-60/bbl,” said one producer, who expressed scepticism at the chances of the proposed HCl increase.

Prices for acid fell from above $200/wet ton in January 2015 to $50/wet ton ex works US Gulf or less today. Some shipments from by-product producers have been heard at cost – or less – on a delivered basis.

But others in the market are happy to see some market movement rather than repeating the overriding dynamic of the past 18 months: long supply and slack demand.

“I hope it takes, so some of us can start making some money instead of losing it,” said a distributor.

Still, oilfield activity isn’t expected to recover significantly until this time next year or thereafter.

US HCl producers include Axiall, BASF, Covestro, Formosa Plastics, Occidental Chemical, Olin, Huntsman, DuPont and Skyonic.

INSET IMAGE: Close-up of a drilling bit used in the oil sands of Alberta, Canada. (Design Pics Inc/REX/Shutterstock)