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H2SO4 – LEI?
We use sulfuric acid in just about everything we consume. It is used in
batteries, paint, fertilizer, ore processing, steel production and
water treatment. It is a building block for a number of products like
nylon, we pickle our food with it. By volume, it is the largest
industrial chemical produced in the US.
There is no futures
market that tracks this important commodity. This graph is of selling
levels for bulk delivery at Gulf ports.
This
is a boom and bust story. If you want evidence of how out of whack
things got over the last year and a half this chart is a good place to
look. Prices for sulfuric acid rose 700% in just 18 months. This was
when oil was 180 and scrap steel was gold. Now it is 70% below the
prices before the bubble. It has been a tough recession.
When
the economy tanked the market value of this acid went with it. Prices
through August 2009 have held their lows. It would appear that
government economic intervention can impact GDP, but it does not seem
to have much impact on demand in the industrial sector.
The
Chicago PMI report caused a bit of a hiccup yesterday. The report
showed a seasonally adjusted drop from 50 to 46.1. This lines up with
the information on sulfuric. There is not much demand for ‘stuff’ that
we use to make other ‘stuff’. This does not jive with the current
notion that the economy is benefiting from a significant inventory
correction.
Sulfuric acid looks like a high beta Nat Gas
chart. Gas is a principal ingredient in production of this acid. So in
this case gas is the dog and sulfuric is the tail that gets wagged
around. But sulfuric is a very big tail and its demand (or lack
thereof) may also cause the dog to shake a bit. For those who follow NG
keeping an eye on sulfuric prices could be helpful.
There
is another reason to follow this commodity price. One can be sure that
the Fed watches it. This is one of many pipeline sources of inflation.
Looking at it today you could say that there is little ‘cost push’
inflation from this. But if in four months this commodity price
recovers it will be one of those data points that the Fed will have to
consider. For what it is worth the price of Gulf sulfuric acid was back
up to $30 at the end of the month. From the Chicago PMI:
Business Activity:
• Prices Paid continued to firm;
• New Orders, Production, and Order Backlogs suffered reverses;
• Employment index continued to retreat at the August rate;
While
the overall report was negative, the Prices Paid component showed
cost-push pressures. Sulfuric acid was just a part of that increase.
The data on sulfuric acid pricing comes from PentaSul Inc. Hat Tip Fiona.
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For those of you who may be interested there is what amounts to an almost pure Sulfuric acid play it's Chemtrade Logistics Income Fund, a Canadian company that trades on the TMX as CHE.UN-T, but it also trades in the US as CGIFF. I've owned it for a while as an income play since it's current dividend is $0.10 Canadian per month, payable monthly. Today's price of CGIFF is around $7.50 US. Even with the withholding tax, the yield is well north of 11.0%. It's been as low as $4.00 US since I've been following it and bought it around $6.00. Bsed on the above article, if this is what CGIFF yields at the bottom of its market it could be a 4 bagger in a decent recovery.
Good post. The fed only cares about inflation from rising wages from the plebeian and modern day indentured servant class. Their pointless jaw-boning may increase when the price of commodities rise.
From back in the day - economic development of countries can be gauged by per capita consumption of Sulfuric acid. Of course this was in the days when countries wanted to climb the economic ladder by industrialization. Sulfuric is not used in pickling food. Sulfurous acid is used as a color maintenance agent. It keeps the canned goods from turning brown. Mostly superseded now but occasionally it is possible to find SO2 listed in food ingredients.
To clarify my earlier post,
sulphuric acid is produced and used in a lot of industries. Take post #86009 for a production example.
Waterdog, phosphate fertilizer is a consumer of sulphuric acid, see http://en.wikipedia.org/wiki/Superphosphate
There are a lot of other producers and consumers around but those examples should make the point.
The price action looks like a spread bet between producers, say copper smelters, and users, say superphosphate producers.
To track the economic activity the volume of H2SO4 might be a way better indicator.
If these prices of a non-traded commodity like h2so4 reflect real industrial demand, then what does it say about the prices of those commodities which are traded on exchanges?
excellent post
This acid is necessary to produce cocaine. Guess which South American country imports the most?
We pickle food with vinegar which contains acetic acid (5%). Sulfuric acid for pickling food sounds painful.
OOPs. My error on pickling. Sorry.
bk
Acetic acid can be produced from methane together with sulfuric acid and a palladium catalyst. So one could say sulfuric acid is a precursor to food pickling. I'm more familiar with using sulfuric acid to pickle metals during fabrication.
We pickle our food with acetic acid (5% acetic acid in vinegar). Pickling food with sulfuric acid - ouch!
I thought we pickled our food with acetic acid (5%acetic acid in vinegar). Pickling food with sulfuric acid - ouch!
For those asking how to track Sulphuric Acid price, there is no futures exchange or such. It is all done via private deals, but certain market information services track the major transactions and report them via subscription services only. Occasionally they will publish samples for public consumption, or subscribers will simply upload theirs to investing groups (as long as no one links to it on the outside and draws unwanted eyeballs).
Otherwise, you can track sulphur prices (also no 'exchange'). The ones that I know are out there for free (delayed) are:
Monthly chart - http://www.potashcorp.com/investor_relations/markets_information/market_...
Weekly raw - http://www.fertilizer-index.com/
A big thanx to you. Sounds like the Baltic Dry in a private way. Interesting to note.
Base materials (minus oil and Chinese pig farming essentials) reflecting reality. Even with the DXY action. Reminds me, in a loose way of the action in industrial metals and equities vs Bonds. I suspect that when the issue has been washed in the topic under discussion the answer will be found.
Great contribution at a key moment. Thanks Bruce.
DH, BTW in my day (not far removed from yours) it came from processing points in the foothills of the Cascades, Southern Oregon and Northern Cal. Cheers. Salute
http://www.youtube.com/watch?v=bmukyU9zTiY
Someone please post where the price can be tracked going forward.
A major supplier of H2SO4 is the phosphate mining industry. The industry creates H2SO4 and combines it with phosphate to make superphosphate- fertilizer. The industry also ships the product to other end users. The manufacturing process of H2SO4 produces a high volume of steam. This steam is captured and directed through steam turbines to produce electricity. The electricity produced by the turbines is used to power the giant excavators located miles away at the pit.
No one is buying fertilizer.
No one is buying fertilizer.
Good. That means I can get even more exposure to the industry at bargain basement prices. World population is only growing and people still need to eat. Under-investment and application of fertilizers now is going to set up a major food crisis in the not-too-distant future, hell, it wasn't so long ago that depletion of grain reserves was front page news...how people forget.
Soros and Rogers are increasing their positions in fertilizer producers whenever there's a dip. I'm with them.
Except those other end users of anhydrous ammonia .
I thought McVeigh and Kazinski were behind bars
Not McViegh, he was "released."
Liquid H2SO4 is also a major bi-product of the smelting of concetrate produced by mining sulphide copper ore deposits such as Phelps Dodge's Clifton-Morenci mine in Arizona (Freeport-McMoran). No copper smelting...no acid, and they produce train loads of it.
Correct. Sulphur has, in a few years, gone from being beyond worthless (would literally get dumped to avoid the cost of holding it), to $700 spot price (and supply deals made to ensure availability), back to worth very little.
Is there even any way for an average person to speculate directly on these prices, future, etfs, etc?
Can people invest 401ks in ultrashort etfs? They would tear it apart on this volume.
Bruce,
A few comments. I read today that NG prices tumbled nearly 8 percent Thursday after the government reported consumption has dropped so low that the U.S. is now storing more than at any other time on record.
As far as manufacturing, why do people pay attention to the Chicago PMI? Who cares? The ISM manufacturing index grew in September. Sure, it came in a little below expectations, but a reading over the 50-threshold is still an expansion:
Superb post.
Very thoughtful take on something I knew nothing about.
Take a deep bow - standing ovation in progress.
Excellent article and insight Bruce. I hope you will revisit this same topic over the course of the next several months. Thank you.
Bruce,
even if I am tired I feel as Chemical Engineer I have to comment.
With Sulfuric acid simple supply and demand might be at work. Sulfuric acid is a by-product of some chemical processes and feed for other processes.
It is a by-product of purifying natural gas, refining sour crude oil, processing ore or making cement.
It is used to make fertilizer, pigments, detergents, colorants, explosives and more.
Any change in the input and output can influence the price. It is difficult to draw conclusions from the price alone, because for sulphur in oil, natgas and ore is considered an impurity and has to be removed irrespective of the cost.
Great additional context to the H2SO4 story. I've watched the discovery channel's whole Modern Marvels series. The episode on acid covered the ubiquity of H2SO4 so I have been hoping to hear more about it in the context of this economy for some time. Either way Gunther I hope to hear more of your expertiese on issues such as these :-)
nope...h2so4 has long been regarded as an important
indicator of industrial activity...i remember
my high school chemistry teacher making a point
of this way way back in the day....
both production volume and price need to be
considered to evaluate industrial conditions but
it is a great tool to check against other
indicators....
however, industrial activity is not a good
proxy of the usa economy because industry is
only roughly 20% of gdp so it clearly has its
limits...
And for insite into the other 80% of the economy I like to start here:
http://www.dmoz.org/Adult/News/
I suspect that this works far better as an international trade & repatriation indicator than of a purely domestic pulse check.
Is it traded on any futures exchange?
I love sulfuric acid. It's way better than those other acids.
If only our current leaders had not eaten the brown acid at Woodstock, none of this would have happened.
It is also used to desiccate nitroglycerin after nitrification, and I titrated H2SO4 into newly made soap after the fats and bases finish saponification. It's also really good for defacing human remains.
Ha ha ha... make sure to chill the reaction with the glycerol + nitric/sulphuric acids while producing nitro. Rinse and adjust the ph after the process is complete. Exothermic reactions can get nasty quickly.... so....
If you start to see green fumes?.... RUN
By the time you see green fumes it will be too late to run. Make small batches with loads of ice. Concentrate the final product after the pH is balanced. The best exothermic reaction are best observed from the firing line.
I'm with you (or was) on the loads of ice. However when you do see the 'green fumes' you still have time to run. It will spontaneously ignite and burn for a long time before (if at all) it will detonate. Makes great rocket fuel... until it doesn't.
Probably you are right. I never stand too close to that sort of reaction anyway. Remote control would be best, I think. Good fuming red nitric acid, what what.
Ok. If we are going to be put on FBI watch lists might as well go all in.
Use hydroflouric acids to get rid of bodies. It's the meltiest. Don't clean without it.
Hydroflouric is one acid even I won't work with anymore. Set up an industrial glass frosting operation once with HF, sulphuric, and ammonium bifouride. Nasty stuff. Anything that eats glass is not something you want on your skin or in your lungs.
However I think good ole sulphuric would be better for saponification of human remains...
.... plus it's cheaper.
As for the FBI... they would have to put 50% of Chem grads in prison then... and I hear they are busy on the FDIC security breach right now....
Just the fumes of HF are very, very bad.
R O L A I D S
That's for hydrocloric acid. ;-)
interesting - never thought of H2SO4 in this light. Where does one get the price data for it?