The anhydrous hydrogen fluoride (AHF) market has been exhibiting a unique dynamic this year, where its own supply and demand factors have taken a backseat to the influence of raw material costs and downstream pricing pressures. Primarily driven by the price of fluorspar, the market has recently seen a surge due to rising sulfuric acid prices, highlighting the significant impact of raw materials on AHF's trajectory.
The sulfuric acid market has experienced a remarkable upswing, with the 98% sulfuric acid price index increasing by 57% since before the Chinese New Year. This surge is fueled by both cost and supply-demand dynamics. Globally, increased demand for phosphate fertilizers in agricultural powerhouses like India and Brazil has led to a 15% increase in import demand. This is coupled with refinery maintenance seasons and rising demand from Indonesia, pushing international sulfur CFR prices above $280/ton. Domestically, port inventories have plummeted by 37% year-on-year to a low of 1.8 million tons. Post-Chinese New Year, phosphate fertilizer companies actively replenished their stocks, further driving up spot transaction premiums. Sulfur-based acid producers have seen their raw material costs increase compared to last year, and this cost pass-through mechanism is pushing acid prices upwards.
While the sulfuric acid market rallied, the AHF market initially remained stable, with factories focused on fulfilling pre-holiday contracts. However, as the sulfuric acid market continued its upward trend into March, AHF pricing followed suit. This upward momentum has continued, with the AHF spot market now experiencing further price increases, supported by the persistently high price of fluorspar and the escalating cost of sulfuric acid.
Many downstream industries are entering their peak seasons, and AHF producers are experiencing strong sales volumes while maintaining high operating rates. The refrigerant industry, a major consumer of AHF, is operating at a utilization rate of 70-80%. However, despite the optimistic demand outlook, companies are facing significant headwinds due to escalating costs. This cost pressure is squeezing profit margins, leading to what some describe as "meaningless" production. According to price index analysis, AHF profit margins have plummeted since the Chinese New Year. In response to this pressure, some factories with available inventory are raising their asking prices, leading to an increase in spot market trading activity. The northern market is experiencing supply tightness due to temporary factory shutdowns caused by cost factors, with some companies purchasing AHF to produce their own downstream products. The southern market is in a tight supply-demand balance, with many downstream factories anticipating further price increases this month and securing contracts earlier in the month. As a result, most factories are focused on fulfilling existing contracts and have limited excess supply available.
Looking ahead, the sulfuric acid market is expected to continue its upward trend, driven by cost pass-through, seasonal demand, and the traditional peak maintenance season in the second quarter. This will further erode the profitability of AHF producers as they continue to purchase sulfuric acid at higher prices. Consequently, the domestic AHF market is expected to continue its upward trajectory in the short term. Keep an eye on these market dynamics as they evolve!
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