Rising Demand for Fracking Impacting Global Hydrochloric Acid Market

Hydrochloric acid (also known by its chemical formula, HCl) is a strong mineral acid and an important compound of chlorine and finds applications in a host of industrial processes. It is mainly produced as a byproduct during the production of a variety of organic chemicals. Over 40 industrial processes are known to produce HCl as a co-product and the acid is further known to be consumed in over 100 different chemicals and industrial manufacturing processes.

Industries where HCl finds application include food processing, acidization, steel pickling, oil-well drilling, chlorine burners, and pharmaceuticals. High-purity HCl finds application in the fields of water treatment and oil and gas. Over 75% of all the HCl produced in the global market is used for the manufacturing of PVC and polyurethane. Of late, the demand for HCl has substantially increased in the oil and gas industry, especially in the process of hydraulic fracturing or fracking.

Fracking has significantly boosted oil production in the U.S. and has led to a reduction in domestic oil prices. By unleashing vast new quantities of natural gas and crude oil, the process of fracking has offered the U.S. and Canada gas security for at least the next 100 years. With the help of fracking, the total natural gas production in the U.S. is projected to rise by more than 50% over the period through 2040. Currently, fracking accounts for over 45% of total crude oil and over 50% of the total natural gas produced in the U.S.

Changes of this scale have significantly impacted the global HCl market, as HCl constitutes a key part of the fracking process. As the adoption of fracking will increase across the globe, the demand for HCl from this end-use segment will also significantly increase in the near future. 

Driving Forces:

The rising demand for methylene diphenyl diisocyanate (MDI) and toluene diisocyanate (TDI), which are essential in the manufacturing of polyurethane and plastics, across the globe is a key driving factor for the global HCl market. Increased demand for HCl from the oil and gas industry in the U.S. and the Middle East is also leading to an increased demand for HCl in the global market. HCl’s use in the processing of high fructose corn syrup (HFCS), which is an important component of many food products and beverages, is also expected to benefit the global HCl market owing to the flourishing food and beverages industry. Additionally, the rising demand for HCl in metal processing and steel pickling is also expected to fuel the global HCl market in the near future.

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Volatile HCl Prices in the U.S. Market

The demand for HCl has seen a stark drop in the U.S. market in 2015, especially as compared to the previous year. The demand for HCl in fracking observed such a dramatic rise in 2014 that prices soared owing to the tight supply chain.

Prices of HCl also increased owing to the relatively inefficient transportation logistics of HCl: its 35% solution in water is commonly used for transportation and it takes longer durations for refilling the supply chains once they are empty. In response to the vast increase in demand, the global HCl industry has also fallen short of developing new supply chains. Thus, price volatility became a key feature of the HCl market in the US. As the year begun, oil prices began to fall in the global market, which subsequently led to reduced demand from the oil and gas market in the U.S. and led to a stark reduction in HCl prices in this region.

In other regional markets, however, prices of HCl are relatively stable and balanced. Asia Pacific, the largest consumer of HCl across the globe, continues to present excellent growth opportunities for the market in the near future, too, owing to the flourishing markets for food processing and PVC and polyurethane. 

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