Acid shortage could hurt Idaho phosphate miner

An industrial mishap at the Kennecott smelter on Sept. 21 in Magna, Utah, may have unhappy consequences for one of the largest employers in southeast Idaho.

Phosphate fertilizer is not the stuff that makes for riveting nationwide headlines like the Daybell murders or Crisis Standards of Care, but for anyone who lives in Soda Springs (pop. 3,230), it gets a lot of attention. Over 500 direct and contractor jobs depend on the Itafos Inc. phosphate operations in Caribou County.

The Kennecott accident impacts the Itafos phosphate plant in Conda, just eight miles north of Soda Springs. Sulfuric acid produced at Kennecott supplies a large portion of Itafos’s needs at Conda, which is the company’s only plant in North America. Itafos has “a long-term supply agreement” with Rio Tinto, the multinational mining company that owns the Kennecott copper mine and smelter in Utah.

The news release issued by Itafos on Sept. 30 said: “ Itafos announced today a disruption in sulfuric acid supply to Conda from Rio Tinto’s Kennecott mine…The company has been and will continue working to mitigate potential adverse effects of the disruption in sulfuric acid supply to Conda from Rio Tinto’s Kennecott mine. In addition, the company is evaluating the overall expected impact of such sulfuric acid supply disruption, including whether an update on its guidance for 2021 is warranted.”

In response to an Idaho Business Review inquiry, an Itafos spokesperson reported that the sulfuric acid supply situation was not anticipated to cause a shutdown at Conda or any furloughs of employees.

The Kennecott accident

The United Fire Authority (UFA) of Salt Lake County issued a statement on June 21, stating: “At approximately 7:30 a.m., an incident occurred at the Kennecott Smelter that resulted in a cloud of visible smoke. There were no injuries and all personnel are safe. The situation is contained, and the public, nearby facilities and surrounding areas are unaffected.”

Channel 4 KTVX Salt Lake City broadcast footage of a plume of black smoke rising from the center of the smelter and then drifting as a black plume over the Great Salt Lake for many miles. The UFA announced on Sept. 22 that the fire was under investigation. Mining Dot Com reported that the fire was due to a release of molten copper.

Force majeure

Rio Tinto announced a declaration of force majeure on some of its copper cathode and sulfuric acid contracts on Sept. 28. This may or may not have a major impact on its customers. The Magna smelter operation has declared force majeure on its contracts three times over the last decade because of other incidences that have shut down its operations. For example, the smelter was shut down after the March 18 5.7 magnitude earthquake with an epicenter at Magna. Rio Tinto declared force majeure at the beginning of April.

A landslide in Bingham Canyon in April 2013 prompted a smelter shutdown with a force majeure declaration of a few weeks’ duration. On Oct. 8, 2017, the smelter was shut down for more than three months with a declaration of force majeure after a release of sulfur dioxide caused the death of a smelter employee.

While uncommon, force majeure declarations are not unknown for the smelter in Magna. Given the nature of mining, disruptions occur and the mining sector is more accustomed to them than many other industries. What is truly unknown is how long the smelter will take to come back online. Neither Rio Tinto or UFA has issued a statement to date with any information on how bad the damage is inside its Magna smelter.

Sulfuric acid as a commodity

What this means for Conda is unknown. The force majeure may last just a few weeks like the incident in 2013 or it may last months like the 2017 incident. If it does last several months, this would usually not be a problem since the United States is the second-largest producer of sulfuric acid in the world. Sulfuric acid is a by-product of petroleum refineries that must strip it out of crude oil to make usable fuels.

The current market for sulfuric acid at the moment is different from usual market conditions. Refinery production of sulfuric acid has dropped in the U.S. Sulfuric acid is a by-product, not a main product, at refineries. The amount that is produced depends on the amount of crude that is processed. Because of the pandemic, which led to decreased industrial output and travel in 2020, refineries lowered their rate of production, leading to a fall in domestic supply of both petroleum products and the sulfuric acid by-product.

Now that domestic demand for both petroleum products and sulfuric acid has once again increased, U.S. production has been unable to recover in the short term because of the damage to gulf coast refineries in Louisiana and Texas from 2021 hurricanes and floods. While most consumers have seen the effect of these events at the gas pump, U.S. industries have also seen its effect on sulfuric acid prices, which have almost doubled since April 2020.

Itafos Conda can and does produce some of its own sulfuric acid. In mining operations, sulfides and sulfates are often undesirable waste products of refining ores; but for phosphate plants that need sulfuric acid, the sulfur content of the marines shales of the Phosphoria Formation are a blessing in disguise if they can be used to produce sulfuric acid. The question that is unknown for now is whether Conda can produce enough of its own sulfuric acid to dodge damage to its bottom line.

Phosphate prices

It could be a good time right now to be in the phosphate fertilizer market. After 10 years of declining phosphate prices, which bottomed out in November 2019, prices have since doubled, returning to levels not seen since 2011. Phosphate prices may be in for a further rise, since China announced on Sept. 28 that it would freeze phosphate fertilizer exports through June 2022.

How this might affect Itafos is unknown. The company has other phosphate operations in Brazil, Peru and Guinea-Bissau, which could buffer a sulfuric acid deficit in the United States if it must look elsewhere to supplement its sulfuric acid supply.

This article was updated on Oct. 5 to include a response from Itafos to an Idaho Business Review inquiry.