The zircon industry has never quite faced a situation like it
finds itself in today.
Seemingly everywhere along the mine
to market chain every production blip, every contract agreed,
are conspiring to undermine in the market and squeeze
A raft of production problems at
the worlds leading suppliers is affecting the supply
side, especially in South Africa and Australia. Chinas
insatiable appetite for zircon in ceramics and chemicals, which
is far exceeding industry predictions, is impacting the demand
The two other critical factors
exerting economic and physical pressures: strong currencies in
South Africa and Australia reducing profit margins and last
years destocking trend leaving no inventories to draw
As a result prices have been forced
skywards. New Q4 contracts for this year have increased by
$100-150/tonne the bulk of which is expected to stick.
Premium zircon is now costing
$1,000-1,050/tonne (FOB Australia) if purchased in bulk. This
is 30% higher than at the end of 2009. In what gives further
context, zircon was $400/tonne in 2003.
While there has been industry
discussion on replacement minerals, actual usage has yet to
As the industry moves into the next
round of contract negotiations in the closing month of the
year, the price could go even higher - some predict as
high as $1,150/tonne.
One UK-based buyer said that the
industry was reaching breaking point.
There has to be enough profit
across the industry for people to make enough to carry on. This
is not a long-term business at the moment, the source
But this could be just the start of
a pricing spike.
I expect zircon prices to
double in the next two to three years, zircon expert,
Alister MacDonald of Technical Ceramics Marketing Services Pty
Ltd, explained to IM.
Strong growth in China and
elsewhere combined with flat or falling production are
responsible for the jump in zircon prices this year, said
These basic fundamentals are not
expected to change soon.
Zircon is commonly produced with
titanium dioxide (TiO2) bearing minerals ilmenite
and rutile from heavy mineral sand. It takes many years to
develop a new mine.
For example, Kenmare Resources took
seven years to develop its Moma mine in Mozambique. Iluka
Resources, the worlds leading minsands producer, first
started work on Jacinth Ambrosia in 2004 opening the operation
in February of this year.
The only new supply within the next
12 months will likely come from an Iluka ramp up at Jacinth
Ambrosia and Murray Basin 2, a Bemax Resources start-up at the
new Snapper mine in Australia, and new production from Matilda
Zircon Ltds Tiwi Island operation which started in June
The real story here is that
ore bodies are slowly declining and by 2015 several mature
operations could be depleted. The only new zircon source is in
the Eucla Basin in Australia, Gavin Diener, senior
consultant at TZMI, explained to IM.
Leading suppliers such as Iluka
Resources are also feeling the strain of the market demand.
The Perth-based minsands miner is
the major supplier of zircon to China.
Zircon demand from customers
has remained in excess of the companys ability to supply,
a situation which has led to rationing of volumes across
customers and which is expected to continue throughout the
fourth quarter, the company said.
Scrapers at Ilukas Jacinth Ambrosia, the
largest new source of zircon. Iluka Resources
Demand growth surges
The industry may see month-by-month supply surges say from an
ilmenite miner that hits a pocket of higher zircon
content - something which can and does happen. The success
at Richards Bay Minerals tailings project in South Africa
could also yield more tonnages for the market.
But with Chinas hunger for
zircon growing by the day, the outlook for significant
additional quantities needed is not looking positive.
This year China will consume
around 600,000 tonnes of zircon sand. At a growth rate of
16-18% [pa] its going to need at least an extra 100,000
tonnes which wont happen, said MacDonald.
Chinese buyers are already having
trouble sourcing material.
TZMI expects zircon demand to grow
at an even faster pace in 2010.
We had previously forecast
global demand growth for zircon at 14%... our latest estimate
is 23%, the Australia-based consultants said.
For the minsands industry as a
whole - which produces a range of titanium metal, titanium
dioxide ceramics and abrasive minerals from heavy minsand
sources - zircon has become a poster child for new
The zircon market is a prime
example of some of the activity in the sector with Chinese
demand as strong as it has ever been it is obvious now that
zircon will end 2010 in a reasonable deficit, said
Many of the supply issues faced
today are a result of an industry bereft of investment at the
start of the 2000s.
Greenfield developments are few and
far between with the most likely next on-stream being Mineral
Deposits Grande Cte project in Senegal and Gunson
Resources Coburn operation in Western Australia.
The uncharacteristic level of destocking experienced in 2009 is
a core contributing factor to the tightness seen in the
Such an uncertain future resulted
in either buying hiatus or short-term contracts across the
whole minerals industry. Zircon was no different.
Virtually all major zircon users
decided to run down stocks as buying significant amounts of new
product was deemed too risky. A destocking trend therefore took
With demand significantly ramping
up in 2010, especially from China, there has been no time to
replenish these stocks so zircon is literally going straight
from the mine to the customer.
MacDonald said: No one is
holding stock at the moment, it is all coming from present
And this present production is
having a number of its own problems.
Industry inventories are
considered to be at historically low levels, said
Australia zircon supplier Bemax Resources.
The company, like Iluka, has had
its fair share of delays to the new Snapper mine in the Murray
Basin (see Supply Spotlight).
Exchange rates have also impacted
investment into the sector. The strength of Australia dollar
and South African rand has had a significant detrimental impact
on profit margins as all zircon is traded in US dollars.
If we have the majority of
our revenues in US dollars and translate into Australian
dollars, clearly there is an impact, Robert Porter,
Ilukas general manager of investor relations said to
We had some residual currency
hedging but that was instituted for balance sheet protection
reasons. Our approach to managing margin outcomes (whether
impacted by currency or other factors) will be through both
pricing and cost outcomes, he added.
Handling sands: zircon, derived from the pictured
mineral sands post-separation, is experiencing
some of the strongest demand ever.
Are replacements on the horizon?
The question of zircon substitution has been circulating the
industry for many years but has yet gained much traction.
The present price trend however
again has buyers of zircon, particularly those in the West,
considering their options.
Producers have increased
their asking price by $100/tonne, a European buyer
explained to IM, ...but its going
to come to the point where people just dont use it and
Zircon has many applications all
with their own technical challenges of implementing a
substitute replacement. Then there is the effect the zircon
replacement material will have on the end product. Replacing
zircon could be a false economy.
For example in ceramics zircon
gives a pure white finish and in glazes, a high opacity. Any
changes to the to the ceramic mix takes 18 months to two years
to bring to production by which time zircon prices could have
MacDonald explained: For over
80% of applications there is no immediate alternative for
zircon. People will throw at you alumina or tin oxide, but the
cost of tin oxide is ten times the cost of zircon and has
extremely limited availability, said MacDonald.
Alumina is $300-400/tonne but
it does not give the same performance, he added.
Producers of the refractory and
abrasive material, fused zirconia, are implementing price
increases of 20-25% in the latter stages of 2010. The price of
zircon sand, the feedstock used, is a core reason behind the
It is believed that fused zirconia producers would be able
to absorb prices increases of up to $1,800/tonne before
reaching a tipping point towards other zirconium
The most advanced zircon projects
||Zircon target (tpa)
|Mineral Deposits Ltd
||Grande Cote, Senegal
|Gunson Resources Ltd
||Coburn, Western Australia
|Base Resources Ltd
||Toliara Sands, Madagascar
||Typhoon, South Australia
DFS = Definitve Feasibility Study
FS = Feasibility Study
BFS = Bankable Feasibility Study
Zircon Prices (nominal dollars)
2000-09 CAGR Iluka = 12.2%, TZMI = 12.8%.
Source: Iluka and TZMI Mineral Sands Annual Review (2010)
Pricing lessons from history
Spikes in value have been seen before
As buyers baulk at the rising price of zircon sand well over
the $1,000/tonne mark complaints are rife that the cost is too
high and the present situation is unsustainable.
But the industry has been here
2010 comparative value: $1,810/tonne
Reasons: On 4th July 1988 the Singa Sea vessel
sank in heavy weather off the coast of Western Australia
carrying with it 13,000 tonnes of zircon sand, 2% of the global
demand at the time.
This forced smaller contract prices
of zircon to rise above $1,000/tonne on a CIF basis from
Rotterdam. Contracts signed earlier in the year saw a wide
price variation between $300-700/tonne for standard grade
In todays money the range
would be $544-1,270/tonne.
The sinking of the Singa Sea
compounded what was already a tight supply situation akin to
that of today.
Quoting from IM November 1990:
It was the combination of increased demand together with
static production levels which conspired to create the
tightness seen in the market.
This paints a very similar picture to today. This time
however it was Japans steel and ceramics industries that
were driving the spike in demand.
Slow ramp ups and poor planning hinder flow of new
One of the core reasons behind zircon sands price heading
north has been significant problems affecting major suppliers.
In what can be viewed as a mix of bad luck and self-inflicted
problems, miners in Australia and South Africa are struggling
to reach production targets.
Ilukas slow ramp up
Iluka Resources delays in ramping up its new Murray Basin
2 and Jacinth Ambrosia zircon-focused operations has resulted
in less product on the market than expected in H1 2010.
The two projects are the centre
piece to Ilukas new business model which is seeing more
emphasis on supplying zircon, moving away from the lower value
TiO2 feedstock, ilmenite.
For H2 2010, however, more zircon
has come onto the market from the Australian operations with
Iluka expecting to hit its 2010 annual targets.
Things are looking up for Jacinth
The company said: Total
zircon production sourced from Jacinth-Ambrosia for 2010 is
expected to be approximately 150,000 tonnes, underpinning
confidence in the achievement of the expected full year 2011
production of 300,000 tonnes.
Bemax Snapper delays
A number of factors including market conditions in 2009 have
delayed the commissioning of Bemax Resources new Snapper mine
in the Murray Basin.
Originally slated for a 2008/09
start-up, Snapper is now expected to be in operation before the
end of 2010.
To give the new project a boost,
Bemax will use workforce from its Ginkgo mine to shorten the
ramp up time.
We are drawing on the
experienced workforce from Western Australia to support the
Snapper Mine commissioning, as well as redeploying staff and
equipment from the nearby Ginkgo mine, said Bemax chief,
As of end-September 2010 Bemax
mined 25,257 tonnes of zircon and sold 35,405 tonnes,
supplementing from stocks. The company appears on track to
match last years production figure of 31,186 tpa. This
was a very poor year for global zircon demand however with most
buyers running down inventories rather than buying new
Exxaro: strikes & mine closures
South African mine strikes in August and September saw
production slow for nearly a month at Exxaro Resources.
A nationwide dispute over wages
cost Exxaro three weeks of full-rate production at its 9m. tpa
heavy minsands Hillendale mine before agreeing to an 8.5% pay
The company had an output of
300,000 tpa zircon in 2009 from its KZN Sands, Namakwa Sands,
and Richards Bay operations. Output from KZN, however, will be
wound down over the next five years after the company made the
decision to close it.
The company also cancelled its Fairbreeze mine plan owing to
the global financial crisis which would have been
Anticipated zircon consumption December
2010 to March 2011
The arrows indicate comparative consumption
between end markets. Across the board
demand is expected to increase.
Where is zircon sand produced?
Data in tonnes