Metals fortify fluorspar

By Jessica Roberts
Published: Sunday, 22 November 2009

Long-term aluminium and steel outlook indicates fluorspar consumption could grow by 50%, but short-term forecast sparks debate at Fluorspar 09

The mood of delegates attending IM’s Fluorspar 09 (F09) conference, 17-19 November 2009 in Valencia, Spain, was on the whole fairly positive, although after a year of turbulent aluminium and steel prices, some members of the fluorspar supply chain were, understandably, more conservative with their optimism.

The keynote speech by UK economics consultant James King addressed the short-term and long-term demand scenario for fluorspar in metallurgical markets both its role in aluminium fluoride (AlF3) production and as a fluxing agent in electric arc furnace (EAF) steel.

After berating analysts for missing every past significant economic dip including the most recent world recession King gave a comprehensive forecast indicating that AlF3 markets could account for a 4% growth in fluorspar demand next year.

This modest rise was countered with a long-term growth forecast of nearly 50%, with King predicting an additional 1.05m. tonnes of fluorspar could be needed for AlF3 production and aluminium smelters by 2030.

A bullish growth figure of 10% was predicted for steel-related fluorspar consumption in 2010, while King’s longer term outlook suggested an extra 1.77m. tonnes of fluorspar could be required for EAF steel production by 2030 that is, if EAF steel output reaches King’s estimate of 840.1m. tpa, over 50% higher than 2008 production.

AlF3 shake-up

A slightly different AlF3 supply scenario was presented by Michael Reynolds, director of MS Reynolds Srl, during day two of F09, who suggested AlF3 prices are likely to fall before they increase, owing to a possible export surge by Chinese producers.

Reynolds proposed that Chinese AlF3 producers will adopt an “aggressive export policy” from 2010, as forecasts indicate that the country will only require 50% of its AlF3 output next year. As a result, world AlF3 prices are expected to reflect China’s lower production costs.

Should Reynolds’ prediction come true, this could have a significant impact on western AlF3 producers, who would have to compete with higher exports of lower cost Chinese material.

Working out the calculations, Reynolds suggested that China’s 2010 production could grow to 555,000 tonnes with 370,000 tonnes reserved for domestic use and 185,000 tonnes earmarked for export. Considering world AlF3 output was 845,000 tonnes in 2008, China certainly holds a significant share of the pie.

More importantly, if export levels grow, only 185,000 tonnes of the West’s 338,000-tonne AlF3 capacity would be utilised; representing a utilisation rate of around 55% and far below the 75-80% rate required for companies to survive.

What this could mean is further market consolidation. As Reynolds summarised: “It will be like musical chairs as utilisation rates fall: someone will end up on their backside.”

China’s rejects dispute panel

Predictions of China increasing its AlF3 exports may seem inconceivable to some, then, considering that the country is still fighting a World Trade Organisation (WTO) challenge by the EU, Mexico and the USA regarding its export restrictions on key steelmaking minerals a subject addressed by Dan Horovitz, partner at law firm Holman Fenwick Willan LLP, during the last presentation of F09.

Horovitz believes it is a case of when, rather than whether, China will be forced to change its trade policies; perhaps even prompting its present export licensing system to be dismantled.

Unknown to delegates at the time, reports in China Daily released during the last day of F09 indicated that China has rejected the EU, Mexico and USA’s call for a WTO investigation into its export policies.

During a meeting with the dispute settlement panel the latest development in the export case Chinese delegates reiterated that the country’s measures related to exportation were “consistent with the principles and rules of the WTO,” and that China “consistently respects and abides by the WTO rules and its own commitments”.

One member of the delegation commented: “China is disappointed that the three complainants choose to move forward with requests for panel establishment at this meeting ... and [China] is not in a position to agree to the establishment of a panel at this time.”

Requesting a panel is the next step in the WTO dispute settlement process after consultations fail. As a panel request can only be blocked once, if the EU, Mexico and USA decide to make a second request at a later date, then this would be granted automatically.