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Cut back: How China’s economic turmoil is impacting the garnet industry

By Liz Gyekye
Published: Friday, 31 July 2015

The silicate mineral garnet is mainly used in the industrial abrasive and filtration industries, meaning that its consumption is loosely tied to economic activity, although its niche position protects it to some extent from the vagaries of GDP performance. Raymond Ding, managing director of Chinese garnet producer, Wuxi Ding Long, spoke to IM about the effect China’s economic turbulence is having on this niche mineral and its end markets.

With its name derived from the Latin word granatum, meaning pomegranate because of its resemblance to the fruit’s red, shiny seeds, garnet, once prized principally as a gemstone, has for a long time received the bulk of its demand from more utilitarian applications.

As a refractory mineral, garnet is consumed in small amounts compared to other minerals in this field, like magnesia and alumina. It is also used as an abrasive and in high pressure abrasive water jet (AWJ) cutting equipment by electronics manufacturers and the nuclear industry to ensure smooth surface edges on cut metals and glass, and as a filtration mineral.

Garnets_Mouser Williams 
Cutting it: Garnets were traditionally prized as gemstones but are now valued more for their abrasive qualities (source: Mouser Williams).

These niche applications have helped shield garnet from the worst effects of the slowdown in Chinese industrial growth, but that does not mean that the garnet business is free from challenges, as Raymond Ding, managing director of Chinese mineral producer and trader, Wuxi Ding Long Co. Ltd, explains.

Although its main business in garnets, Wuxi Ding Long, based in China’s Jiangsu province, exports various industrial minerals and mineral packaging products from China through its industrial mineral products division, Sinogarnet.

The trading company specialises in abrasive, refractory and foundry minerals, which aside from garnet also include sillimanite, ceramic foundry sand, ceramic proppants, chromites, mica, bentonite, manganese ore, zircon sand and high purity quartz.

It sources its materials mainly from the Jiangsu, Inner Mongolia, Henan and Hebei regions in China as well as importing minerals from Tamil Nadu in India and from suppliers in the US and the Middle East. It exports its products globally, to Europe, Japan, Australia and New Zealand as well as to customers in Africa the Middle East.

For its imported minerals, Wuxi covers the whole Chinese domestic market with more than 600 active customers across China. The company has also established four strategic logistics facilities along the China east coast area at Dalian, Shanghai, Wuxi, Ningbo and Huangpu.

Although it has diversified supply and customer bases, Ding says that having a strong position in a number of niches is important to ensure the health of its garnet business.

Where do you source your garnet from?

Garnet, a natural abrasive mineral, is our most popular mineral. We focus on two types of garnet – alluvial and beach. We are exclusive agent for the Chinese market and the largest producer of this beach garnet from India, which we source from Andhra Pradesh and Tamil Nadu.

India-based VV Mineral is the largest producer of heavy mineral sands and we are the agent for them for the Chinese market. We import around 9,000-10,000 tpa garnet from this company a year.

Crushed hard rock garnet is produced in China and we source this material domestically.

Which markets do you supply your garnets to?

Our garnets are used in the applications of sandblasting, water jet cutting and water filtration.

Abrasive water jet-cutting (AWJ) technology is getting more popular worldwide. Therefore, global demand for AWJ cutting-grade garnet is increasing steadily, including in China’s domestic market.

Garnet is also widely used in multi-layer water filtration and anti-skid in addition to the environment-protection construction industry.

The major advantage of water jet lies in the fact that the process is cold – there is no heat affected zone. Traditional mechanical cutting methods such as cropping and welding destroy the structural integrity of such materials. Likewise, existing thermal processes such as laser or plasma cutting deform the edges of cut composites and can also create stress, microfissures and structural changes.

Water jet cutting doesn’t exhibit these effects. 

Where do you see new growth applications?

The AWJ-cutting market is really one of the strong growing applications for garnet. The nuclear industry is also growing in China, as the country moves away from coal power stations. Nuclear power operators tend to use water jet cutting equipment to help manufacture their plants and we see opportunities in this area.

How has the recent turmoil in the Chinese stock market had any effect on your industry?

The Shanghai stock market saw its biggest fall in history [at the end of July]. Last year, the Chinese government implemented a strategy to prop up the domestic share market to help improve the Chinese economy and China’s central bank reduced interest to get more money into the system.

In recent times, everyone has wanted to come to this market in order to make some money. The Chinese stock market is like a casino with people gambling on it.

Many people were out to make quick money and this has contributed to stocks tumbling. When some people saw the market growing, they put money into it and then when it failed, they felt scared and started to take their cash out.

The government has recently reported that the second quarter GDP stood at 7% growth. The financial sector makes up 1% of this figure – industry output and profits are poor.

The stock market challenge and low commodity prices are all negatively impacting on the economy.

Over the past two decades, China has pumped money into ports, airports, motorways and buildings. These have generated significant demand in the past, but now there is the problem of oversupply, so there is not enough space for investors to make big investments.

The fastest growing sector was China’s housing market – especially new builds in Beijing. However, there are now too many empty houses with nobody buying them. So, the property market has cooled down as developers are finding it difficult to sell their properties. Hence, there is a lack of investment in office and commercial buildings.

 Pomegranate_coniferconifer
The word for garnet comes from the Latin word for pomegranate, granatum, because of the mineral's resemblance to the fruit's red, shiny seeds (source: coniferconifer).

This is important because the property market is a driver for the construction and mining industries. Materials such as steel, metals, concrete and glass depend on this. All big commodities are dropping in price due to lack of demand for these materials.

What about the refractories market?

Due to a lack of appetite for construction materials and steel, demand for refractories is low. The economies of Brazil, China and Indonesia, which are consumers of Chinese products, have slowed down which has also impacted on demand for our materials.

In addition to this, the US dollar is strong and this affects all other currencies. As a consequence, Chinese exports have also slowed down.

Many factories don’t have enough jobs today so the purchases of our garnet products have decreased.  We have seen around a 5-10% reduction in sales.

What is the Chinese government doing to help mining companies?

China is hoping to develop an Asian Infrastructure Investment Bank (AIIB) to help progression in China and countries in the Asia-Pacific region. It aims to lend money to build roads, ports, mobile phone towers and other forms of infrastructure in our neighbour countries in Asia. The organisation and regulation is ready and China is the largest shareholder in this bank.

Chinese manufacturing will also provide all the products to help these areas. This will help create a new big market for Asian countries.

Wuxi supplies abrasives to Chinese manufacturers. We can benefit from this new scheme if it is successful and we can also get finance and lots of orders from our neighbouring countries.

In Malaysia, Indonesia and Singapore, they all have infrastructure that is still underdeveloped. China has opportunities to provide these countries with their materials.

Urbanisation is another strategy adopted by the Chinese government. This will also bring opportunities as demand grows for construction materials.

In the long term, I feel that China will still be an important market for the global mineral industry, despite all the economic problems, low commodity prices and low demand for materials — especially with the introduction the AIIB.

 

 

 

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