Domestic Hydrochloric Acid Market Is Quietly Undergoing Change     

1. Product portfolio changes   

As an important inorganic chemical material, hydrochloric acid is widely used in dyestuff, medicine, food, printing and dyeing and leather industries. Currently, there are 236 hydrochloric acid (containing 31% hydrogen chloride in weight) manufacturers in China, which mainly concentrated in the chlor-alkali industry and fertilizer industry. There are also more than 60 enterprises in other chlorine-consuming chemical segments that can each produce over 10 000 tons of hydrochloric acid with low concentration every year.
   A chlor-alkali company can usually manufacture miscellaneous chlorine containing products, it is necessary for it to adjust the output proportions of different chlorine-consuming products according to the profit margin. In recent years, the selling price of hydrochloric acid has kept declining, and even has been lower than the production cost in slow season, resulting in the output shrink of synthetic hydrochloric acid in chlor-alkali companies. While, the output of the by-product hydrochloric acid of potash fertilizer manufacturers slightly has increased due to low-cost.
   Hydrochloric acid for imports and exports are mainly in electronic grade and reagent grade hydrogen chloride. China's import volume of hydrogen chloride has kept increasing in recent years.
    During January to October 2009, China produced around 6.53 million tons of hydrochloric acid, up 2.6% year on year, Of that, 2.80 million tons were made in eastern China, up 15% year over year, 1.10 million tons in northern China, an annual increase of 17.5%, and 957 800 tons was produced in central China, down 5.4% compared to the same period of last year.
   The transportation cost of hydrochloric acid is relative high for its strong corrosive nature, which is not propitious for long-distance sales. Moreover, the type of downstream products varies greatly in different regions.
   In northern China, the consumption volume of hydrochloric acid often displays seasonal variations. Generally, late October to the next March is the traditional period for the full-loaded running of the heating system, the thermoelectric industry can consume triple the hydrochloric acid volume as other months, leading to a shot soaring of hydrochloric acid price.
   While it does not need heating in southern China, so the hydrochloric acid consumption in this region is relative even in different seasons. As the largest chlorine-consuming product, hydrochloric acid's price is closely associated with that of liquid chlorine.

2. Development trend    

   The positive factors for the development of hydrochloric acid industry in the future include:
   (1) The government is restructuring the product portfolio of potash fertilizers. While reducing the application ratio of potassium chloride, the Chinese government requires manufacturers to increase the content of potassium sulfate in compound fertilizers. It is estimated that the annual growth rate of China's potassium sulfate output will maintain 10% in the next few years, so the output of by-product hydrochloric acid will also increase.
   (2) Lysine is the alternative additive in feedstuffs replacing bone meal. Demand for lysine in downstream sectors and exports kept increasing in recent years, and large new and expansion capacity sprung up. It will result in a 4% - 6% domestic consumption growth of hydrochloric acid annually, that is about 50 000 tons every year.
   (3) The acidification section of the corn deep processing for the production of starch, alcohol etc, consumes large volume of hydrochloric acid. In China, deep processing of surplus grains has a promising market, which may draw the demand for hydrochloric acid increasing. In addition, the consumption of hydrochloric acid in oil exploitation, and metallurgical and mineral processing is steadily growing, although this consumption is relative small and can hardly bring great influence on the overall market.
   The negative factors to hydrochloric acid sales include:
   (1) Affected by the governmental macroeconomic policies, the development of hydrochloric acid downstream industries is probably to slow down.
   (2) The shrinking demand for hydrochloric acid in the pharmaceutical and rare earth industries may offset the demand increase in other industries, for these two sectors are the chief consumers of hydrochloric acid. Also, the seasonal oversupply of hydrochloric acid is hard to alleviate.  
   (3) With the technological upgrades of decolorization and de-sulfate of by-product hydrochloric acid in fertilizer makers, the quality of by-product hydrochloric acid is gradually closing to the synthetic hydrochloric acid, and it can replace synthetic hydrochloric acid in many fields except the pharmaceutical and food industries. Due to its low-price, the by-product hydrochloric acid is constantly nibbling away the market share of synthetic hydrochloric acid. The competition between these two types will surely lead to price drop.

Annual output of hydrochloric acid in China       (31% HCl)
Year     Output (000 ton)    Growth rate year on year (%)
2005    6 582               16.5
2006    7 102               7.9
2007    7 476               5.2
2008    7 571               0.7

Annual import and export of hydrogen chloride in China      (ton)
Year      2005    2006    2007    2008    2009 (Jan.- Oct.)
Import    900     900     1 600    24 800    32 500
Export    7 500    7 900    7 100    6 600    5 500