China’s talc challenge

By
Published: Wednesday, 26 January 2011

Raw material availability and low cost prices have been the cornerstones in developing China’s talc industry for the last 30 years. However, these benefits are now weakening. Dr Jia Xiu Zhuang, one of China’s foremost talc experts, examines the challenges facing Chinese talc, and recommends solutions for its future prosperity

Looking back at the growth of the Chinese talc industry, Figure 1 shows the quantitative change of talc exports from 1970 to 2009 (see panel on Chinese talc trade).

This can be divided into three stages: the growth period before 1995; the declining period from 1996 to 1999; and the stable period after 2000.

It was a speedy growth period from the early 1970s to 1995, the annual average growth was 5.95%, and the growth rate reached 14.5% between 1990 and 1995.



Pingdu Talc Co. Ltd’s mine near Pingdu,
Shandong has a 150,000 tpa crude talc
production capacity.


The export volume for 1970 was only 104,900 tonnes, and it reached 1.59m. tonnes in 1995, which was the highest record in history, the export volume occupied 67% of the world’s trading volume in the same period. Since the 1980s, China has been the largest talc exporter in the world.

China started to implement administrative control over talc export quotas in 1996. The export volume was swiftly reduced from 1.59m. tonnes in 1995 to 1.03m. tonnes in 1996.

The first issue was the outcome of controlling the export quota volume, followed by the reaction towards market changes.

Before the mid-1990s, the majority of Chinese talc was used for paper filler. However, this part of the business started to shrink rapidly starting in the 1990s. Even without the limitation of export volumes in 1996, talc exports began to dwindle quickly after 1996.

After the 1990s, talc demand grew from the plastic market boom, this was the most important application and growth point for Chinese talc exports after 1995. At present, 50% of the export market is destined for plastics demand, followed by paint and cosmetic products.



“If the development drive of the Chinese talc
industry in the past 30 years was from the
export market, then domestic demand will
now exceed the drive for exports in the future”,
Dr Jia Xiu Zhuang, Haichen Minchem Co. Ltd.


Export license system

The paid use of non-exempt export licenses and the tendering method is an important feature of China’s talc export sector. Qualification for participation in the tender and the tendering process follow the rules and regulation as stipulated in “Invitation to Tenders for Export Quotas Procedures” and “Invitation to Tenders for Industrial Product Export Quotas Implementing Rules”.

Products that have been included under talc export quota control are:

  • Unmilled and unpowdered talc (HS: 25261020)
  • Talc powder (HS: 25262020.01)
  • Other milled or powdered natural talc (HS: 25262020.90)
  • Talcum mixture with 50% of talc by weight (HS: 38249091)

In recent years, the total export quota volume has been about 610,000 tonnes. Owing to the impact of the financial crisis in 2009, this volume has decreased to 400,000 tonnes. The volume resumed to 610,000 tonnes in 2010, in which 366,000 tonnes was for the first half of the year, and 244,000 tonnes for the second half of the year.

A total of 40 companies acquired tender qualification and received relevant export quotas.

Producing regions

The main producing regions for Chinese talc exports are Liaoning, Shandong, and Guangxi provinces (Figures 2-4).

The overall trend is that the export proportion of Liaoning has shown a gradual reduction over the years, while that for Guangxi has shown an annual up-scale trend. Shandong has shown rather minor fluctuations. There are signs of a slow down in these trends in recent years.

Figure 3 is the export proportion for talc type in 2009, ie. raw materials and powder. Liaoning has the largest export volume for powder, which is about 55%, while Guangxi accounts for 36%.

Guangxi has the largest raw material volume, which accounts for 54.3%, while Liaoning accounts for 30%.

Overall, Liaoning has reduced its volume from 61% in 1994 to 44.6% in 2009, but Guangxi’s volume has increased from 21% in 1996 to 45.6% in 2009. The export volumes of Liaoning and Guangxi are about the same at present. Liaoning has the export advantage in powder while Guangxi’s advantage is in raw material.



Hand sorting talc at Aihai Talc Co. Ltd’s mine
near Haicheng, Liaoning.


Chlorite

China also exports about 30,000 tpa of talcum mixture and chlorite (talc content <50%). The source of this material is mainly Liaoning and Shandong.

Talcum mixture normally refers to the gangue or disposable remainder, after the pure talc has been extracted. It is mainly exported to Japan, South Korea, and South East Asia.

According to export rules and regulations in 2009, talc for export that has >50% content of mixture shall be treated as talc, which is subject to an export quota.

Domestic market outlook

The international market has always been the major driver of Chinese talc industrial development. However, changes in the domestic market have captured attention in recent years.

In the past, the domestic market used to focus mainly on the low grade talc products, such as paper filler; this market has been rapidly declining since 2000.

Contrary to this, middle to high grade talc used in plastic, paint, and cosmetics has seen tremendous growth in recent years.

What is worth attention is that the total annual talc imports of China have already exceeded 20,000 tonnes (Figure 5). Even during the global financial crisis of 2009, the talc import volume and price showed no obvious reduction (Table 1).

Table 1 shows a comparison of import and export prices between 2000 and 2009. The import prices were $463-697/tonne, and the export prices were $110-209/tonne during the same period. The import price was three to four times the export price.

In the coming years, domestic demand for middle to high grade talc will still maintain comparatively fast growth. If the development drive of the Chinese talc industry in the past 30 years was from the export market, then domestic demand will exceed the drive for exports in the future.

In 2009, Chinese production of paper, paint, automobiles, and home appliances reached number one in the world. These markets are the key application areas of talc, and each have huge market potential. The Yangtse River Delta and Pearl River Delta are the main talc consuming regions.

The future key growth market is in the plastics field, particularly polypropylene, which is used in the automobile, home appliance, and packaging industries, their annual growth rate will be maintained at around 5-10%.



Pingdu Talc Co. Ltd in Shandong, has a plant capacity of about 250,000 tpa, although output
is about 100,000 tpa finished product, from 150,000 tpa crude talc mined (see p.32 for picture).
The plant utilises 12 Raymond mills and one Jetmill to produce a range of grades. Dolomite
is produced as a by-product which is used as roadstone.


Increasing prices

Figure 6 shows the export prices of talc raw material and powder from 1994. Apart from the impact from 2009’s financial crisis, prices have been rising.

Between 2000 and 2008, talc raw material prices rose by 143%, and the annual increment was 18%; powder prices rose 89%, an annual increment of 11%. These increases in talc prices were far higher than other producing countries during the same period of time.

There are five main reasons why prices of Chinese talc had remained excessively low in the past:

  1.  Excessive and disorderly excavation; supply was seriously larger than demand
  2.  Low labour cost
  3.  Low resource tax and resource compensation
  4.  Little or no input on environmental protection and ecological restoration
  5.  Lack of deep understanding of the international market

The global market demand for white talc is still growing. While China did not improve its ability to supplying talc grades, in fact such ability has even reduced, Chinese talc is still the significant talc source for the world market, particularly the Asian market.

For example, in 2008, 94.7% of Japan’s talc imports were from China; 95% of South Korea’s talc imports were from China.

Talc from Europe has not been able to satisfy European demand in recent years, and it is believed that with the continued balance of supply and demand, the main talc source will be mainly China.

Chinese talc has been listed as a “high energy consuming, heavy pollution resource” product in recent years. As such, there has taken place major changes in industrial policies, such as the export tax incentive being reduced from 2003, and eventually abolished in 2006.

A 10% custom tax was imposed in 2009, and a “volume reduction” policy was implemented against export volumes, and this export quota was gradually cut down.

A cultivation resumption charge was implemented in 2009, and the reform of resource tax is already in the pipeline. There will be stricter requirements on environmental protection.

The price hike of talc from China is not only the outcome of the supply and demand relationship of the market, but also the outcome of continuously increasing talc production costs and export costs in China.

There is still a great likelihood of further rises in export prices, especially in the price of high grade white raw talc and talc powder. Resource tax, labour cost and the RMB exchange rate are the important factors driving up the export price.

Sustainable development

The decline of production and exports of Chinese talc, price hikes, tightened supply, and as the largest talc producing, exporting, and consuming country, the sustainability of the Chinese talc industry have all received serious local and overseas attentions in recent years.

The so-called high talc production in China in the past was built on a plundering attitude in excavation with little regard for its outcome.

Although this was practiced mainly in small and medium mines, its negative impact on the market should not be underestimated. It has been the root cause of Chinese output exceeding demand, hence its price declined.

The price of the world’s top grade pink talc produced by China dropped from the level of 15 years ago until the recent $83/tonne mark. Since 2000, the situation has undergone change.

After 20 years of mining, the majority of the small and medium mines became exhausted, or nearly exhausted, and production of Chinese talc started to decline.

In 2005, the Chinese government carried out a re-organisation of mining and resource companies, and illegal excavation was minimised.

Among the three main white talc producing regions of China, all mines in Liaoning have been privatised. Shareholding structural reform for mining companies has also been completed in Shandong, and mining in Guangxi is under control.

Going forward, it is hoped that the talc industry of China will develop towards a healthy, steady, and sustainable direction.

Industrial policy and the future

Despite being listed as a “high energy consumption, heavy pollution resource” product, Chinese talc actually has low emissions in carbon and other pollutants. Carbon emissions of powder processing are between 150-800kg/tonne.

There are also no issues with sewage, nitrides, and sulphides, while dust problems can be effectively solved. Talc can be used in pottery and ceramics to lower firing temperatures; talc can be used in polypropylene packing, economising the consumption of resin.

As reserves get exploited, the quality of raw material may decline, and excavation costs will rise. Therefore, the shortage of resources is foreseeable could be a problem that deters further development of the talc processing industry.

At present, talc raw material prices in Liaoning are $50-100/tonne higher than other producing regions in China, and $50-100/tonne higher than neighbouring countries. Therefore, the historic relative price advantage of Chinese talc raw material is weakening.

Further development of the Chinese talc industry can no longer rely on low cost resources, it should rely on accumulated experience in processing and technology, develop fine processed products with high added value, and improve the effective usage of resources.

What is worth highlighting is that although the size of the Chinese talc industry has shrunk by 50% compared to 15 years ago, production has grown by 500%.

The price of high grade products has increased from the $200-300/tonne five years ago, to $500-600/tonne, or even in excess of $1,000/tonne.

Chinese micronised powder output in 2009 reached about 130,000 tonnes. Such higher grades are increasing in volume and a range of new talc grades have been established in a variety of sizes and surface modification.

While this is good news, the critical shortage of raw material may possibly limit the development of the talc processing industry to develop such grades further.

There is a necessity to consider the following three adjustments of the industry in order to achieve sustainable development of the Chinese talc industry:

  1. Control of raw material export volume, encourage export of finished product
  2. Encourage exploration and consumption of medium-low grade raw material
  3. Allow import of material for processing and make use of global resources

Export controls

For many years, there has been no classification of talc exports by raw material, primary product, or fine processed high added value products they are all under the same quota.

In 2008, the central government imposed an increment of 5-10% of export tax on all talc products, including the high added value grades.

In Figure 7 (Exports panel) can be seen the export share between talc raw material and powder, there has been no obvious reduction in export of raw material for more than 30 years; it always occupies more than 40% of the total export volume, and even 65% in 1998.

The adverse impact caused by a lack of raw material on processing talc is already visible, and there has been no obvious increase in the export share of talc powder over the years.

However, on the other hand, raw material is still being exported in large volumes. Therefore the present policy must be questioned.

The talc industry suggests a different quota control to be imposed separately for the raw material export and the powder exports, and different tax measures should also be implemented, while exports of finished products are to be encouraged.

Exploration & use of middle-low grade talc

Medium-low grade raw material is a “talcum mixture”, the disposable mixture after the mill run, containing 30-70% talc. This portion of the tailings cannot be extracted effectively, since it has no talc characteristic and hence could not be used as talc per se but only as an ordinary low cost filler, such as in paper, low grade paint, and agricultural products.

Be it the product itself or the market application, talc and “talc mixture” are two entirely different products.

The domestic market is unable to consume all talc mixture produced, and exports have always been its most important market.

Since the Chinese Custom’s issuance of its “Talcum Mixture Export Management Announcement” in April 2008, mixtures with a content of >50% talc are all included under the scope of the talc export quota.

Although talcum mixture is included under the scope of tender invitation and quota management control, the number of quotas have not been increased correspondingly. This has resulted in tight availability of export quota licences, and rising prices.

At the same time, as the cost of the quota license is relatively high and the quota is limited, it is actually blocking the export channel for 50-70% talcum mixture, and the share of this portion of talcum mixture occupies more than 50% of the total volume.

The talc industry should consider redefining the talcum mixture level included under the export quota management control, and it is suggested that the talcum mixture level is raised from the existing 50% to 70% talc content.

There is also another issue with the government’s definition of another impure talc grade. The 2008 No.100 Announcement by the Ministry of Commerce and General Administration of Customs, declares that talcum mixture with >10% of magnesite or chlorite should be treated as magnesite, and exportation of such is prohibited.

This policy now requires clarification based on a fair and scientific approach.

The majority of mined deposits in Liaoning contain magnesite. Even the medium-low grade crude magnesite mined consists of >10% magnesite, but these are considered impure and not sold or used as “magnesite”.

Therefore, the actual effect of this regulation for talc, is that it only allows the export of high grade talc while low grade mixtures (containing >10% magnesite) have to be used in China.

Importing talc looking global

Regarding the long term viewpoint, rich raw materials and upgraded processing ability are the two foundations for further development of China’s talc industry.

However, the anticipated shortage of talc raw material will limit investments and development of the processing industry.

In recent years, the high grade talc raw material of neighbouring countries has demonstrated an obvious price advantage over Chinese talc; this represents a challenge as well as an opportunity.

For the next step, China not only needs to consider how to effectively make use of its own resources, but should also consider making use of the global resources.

At present, China imposes a 5-10% export tax on talc, and at the same time, imposes a 3% customs tax on talc raw material import, and prohibits importing material for processing.

Chinese talc has existed in the international market for 70 years, but the incentive drive is different today. If the raw material sold in all those years was for the sake of survival, then the action required today is to take part in international market competition and to seek room for development. China needs to consider how to make use of global resources.

Without sufficient resource assurance, any future industrial development can only be considered empty talk. Relevant policies and measures on Chinese talc should encourage exploration and exploitation of resources within China, but also cast a wider view globally to allow importation of raw material talc from sources overseas.

Contributor: Dr Jia Xiu Zhuang, director, Haichen MinChem Co. Ltd China. This article was adapted from a paper presented by Dr Jia, “The solution to China’s new talc challenge”, at the 2nd China Liaoning Talc Industry Exposition, 27-29 September 2010, Shenyang organised by the Liaoning Magnesite Resources Protection Office.



Chinese talc reserves & production

Up to 2008, a total of 120 talc mines were registered in China, with 0.26bn. tonnes of resource reserves, 0.138bn. of resources, 0.121bn. tonnes of basic reserves, 75.15m. tonnes of measured reserves. The chart shows the distribution of basic talc reserves in China by province.

The advantages of China’s talc resources include not only its significant reserve volume, but also the superior quality of its white talc. Without export from China, the global market’s demand for white talc is unlikely to be satisfied.

Talc is a relatively low value product, its consumption is normally focused on a regional market. However, Chinese white talc is an exception, even regions such as Europe and North America, hosting relatively rich resources themselves, import about 250,000 tpa of medium to high grade white talc from China.

The status and market applications of Chinese talc in the Asian market and the global market are different. In the Asian market, China is the most important talc supplier and this includes all medium and high grade products.

Regarding the global market, the output of Chinese talc represents about 35% of the world’s production. European and US talc resources are of relatively high purity, and their total output is larger than China’s. Consequently, their respective markets only require China’s high quality white talc.

Chinese talc reserves are expected to fully satisfy the basic demand of both domestic and overseas markets, and for the foreseeable future, while exports remain its most important market.

The accompanying table shows an estimation of production for Chinese talc. At the moment, annual production is 2m. tonnes.

It is estimated that the talc industry will undergo a period of consolidation in the next five years, where production will be maintained at around 2m. tpa, the export volume will be around 600,000 tonnes.

In ten years, production of high grade raw material will further decline, and the export volume will reduce correspondingly. However, the production and export micronised talc powder will both be increased.

The lifetime of the Chinese talc industry is conservatively estimated at >30 years, and optimistically, at > 60 years.

Distribution of talc reserves in China in 2008 (%)

Chinese talc production (‘000s tonnes)

Liaoning   900
Guangxi 550
Shandong 350
Jiangxi 100
Other 100
Total 2,000



Chinese talc trade

Figure 1. Chinese talc export volumes 1970-2009 (‘0000 tonnes)



Figure 2. Talc exports of Liaoning, Shandong, and Guangxi 1996-2009 (%)



Figure 3. Talc exports by grade of Liaoning, Shandong and Guangxi 2009 (%)



Figure 4. Talc exports of Liaoning, Shandong and Guangxi 2009 (%)



Figure 5. Chinese talc imports 2000-2009 (tonnes)



Figure 6. Chinese talc export prices 1994-2009 (US$/tonnes)



Figure 7. Chinese talc exports by grade 1994-2009 (%)



Table 1. Comparison of import/export prices of Chinese talc at ports (US$/tonne)

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Import 491 494 468 463 479 505 464 487 697 695
Export 110 118 122 136 143 164 162 156 226 209