February sulfate market forecast — Slowing down in pace

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February forecast for the sulfuric acid market – slowdown moderates. The financial crisis has pushed the world economy into a deep downturn; given China’s high degree of economic dependence on external factors, the global economic decline inevitably affects China’s economic growth and market demand. In particular, the fertilizer and pesticide industries have been affected by the international economic downturn, facing increasing export pressures that severely impact the development of the sulfuric acid industry. In January, the sulfate market was characterized by a continued decline in production rates in downstream industries, weak market demand, and falling transaction volumes. Although there are signs that sulfuric acid prices are bottoming out, market sentiment still seems to be declining, with little possibility of improvement in the short term. In January, the average ex-plant price of 98% sulfuric acid in the domestic market was 300 yuan per ton, while the market price was 400 yuan per ton, representing a year-on-year decline of 74%. Production status: In January, domestic sulfuric acid producers operated at low capacity, with an average load factor of around 40%. Most small and medium-sized enterprises are either shut down or operating at reduced capacity, while larger enterprises have also imposed strict limits on production volumes. Difficulties in selling products, severe inventory buildup, and reduced liquidity have put sulfuric acid production in a difficult situation. Especially due to unstable market demand and continuously falling raw material prices, sulfuric acid producers are even less willing to increase production. Usually, January marks the peak season for the production of fertilizers and pesticides in China, but this year production of these products remains at low levels, which undoubtedly adds to the difficulties faced by the sulfuric acid industry. Market demand: 70% of sulfuric acid in our country is used in the production of fertilizers, and the first quarter is the peak season for the production of fertilizers and pesticides in the country. However, this year, as demand for fertilizers in the domestic market has slowed down, and particularly due to a significant decline in demand for fertilizers in international markets, exports of domestic fertilizers and pesticides, which rely heavily on international markets, have dropped sharply, thereby having a considerable impact on the sulfuric acid industry. The sluggish sulfuric acid market stands in sharp contrast to the booming market due to shortages last year. Price situation: In January, the market price of sulfuric acid had dropped to the level seen in the same period of 2005. The rapid changes in market demand are beyond the prediction of sulfuric acid manufacturers. Declining demand downstream has led to stalled sales, product backlogs, and operational losses, putting the company under immense pressure. In January, the average ex-plant price for sulfuric acid produced in China was 300 yuan per ton, with some companies selling it at prices even below 200 yuan per ton. Due to the slow start in fertilizer and pesticide production this year, there is significant pressure on the sulfuric acid market. Judging from the current market demand for sulfuric acid, although prices have reached their lowest levels, they may continue to drop slightly further due to weak market demand. Raw material situation: In January, the average ex-plant price of sulfur, one of the main raw materials for sulfuric acid, was below 800 yuan per ton. Compared with 4,000 yuan per ton in the same period last year, the price dropped by 80%. In January, international crude oil prices dropped below $40 per barrel, reaching a low of $36 per barrel – a decrease of about 20% compared to the previous month – and they continued to fall. As a result, sulfur prices are likely to drop further, which in turn will lead to a decline in sulfuric acid prices. Market outlook: Affected by the slowdown in international economic growth, domestic economic growth is also set to continue slowing down. Although the price of sulfuric acid in the domestic market has currently dropped to relatively low levels, it does not seem to have reached its bottom, and there is still a possibility of further decline. The situation in the production of fertilizers and pesticides is quite challenging. However, it is expected that in February, production levels will increase to boost inventory levels for the off-season, which will lead to a slight rise in sulfuric acid demand. Yet the overall oversupply situation in the sulfuric acid market will not change significantly; prices are likely to experience a slowdown in decline and may reach a temporary level of stability.