Atacama Minerals Aguas Blancas mine, Chile:
The Atacama is the driest desert in the world
The past nine months have been an
unusual blip in one of the most stable industrial mineral
industries. The Tohoku earthquake, water shortages in Chile and
robust demand combined to create a perfect storm, blowing
iodine spot prices up to record levels.
Events showed that in a
finely-balanced industry with few producers, small disruptions
on the supply side can have a disproportionately large effect
on the global market.
The global iodine industry is
characterised by the dominance of Chile, Japan and the US,
which together supply over 95% of the worlds demand. And
with annual demand at around 30,000 tonnes, it is a relatively
The supply side is concentrated,
but iodine use is spread widely across over 10 main
applications, led by x-ray contrast media, biocides,
pharmaceuticals and LCD screen technology.
Iodine, from the Greek
iodes meaning violet, is mainly found in
three environments - sea water, subsurface brine and
caliche nitrate ore.
Chile has become the
highest-volume, lowest-cost supplier, thanks to the abundance
of iodine found in the caliche ore of the Atacama Desert.
The South American country has by
far the worlds largest known iodine reserves, hosting
over 9m tonnes, according to the US Geological Survey.
The caliche ore is leached with an
alkaline solution to form sodium iodate. This crystalises and
is processed further to produce high-purity iodine.
In the worlds other two major
producing countries, Japan and the US, iodine is produced from
brines associated with natural gas.
Japan hosts 5m tonnes of iodine
reserves, which are largely extracted from the Minami Kanto gas
field in Chiba prefecture, east of Tokyo.
The US iodine industry is centred
round the Andarko Basin in the south-central state of Oklahoma,
where three companies extract the mineral from the brine at
depths between 1,500 and 4,000 metres.
Caliche ore processing at Atacama Minerals,
Chile. The company is planning to double its
output over the next two years
Chiles caliche ore zone hosts four established
iodine-producing companies: SQM SA, Cosayach, ACF Minera SA and
Atacama Minerals Ltd.
The South American countrys
iodine industry is dominated by SQM, a diverse speciality
chemicals group, which produces over a third of the
worlds iodine and derivatives.
Due to SQMs dominant
position, the company holds a strong influence over the price
of iodine from Chile, which is exported to the developed
regions of Asia, Europe and North America.
SQM produces iodine independently
and, through its joint venture with US-based Ajay North America
LLC, processes organic and inorganic iodine derivatives.
Ajay-SQM Group, which according to
SQM is the worlds leading iodine derivatives producer,
has production plants in the US, Chile and France.
SQM operates four operations in
Chile that jointly produce iodine and nitrates from caliche
ore: Pedro Valdivia, Maria Elena, Nueva Victoria and Pampa
In February 2010, the company
announced it would suspend production from Pampa Blanca and
El Toco, a mine within Maria Elena, due to
decreased global demand.
But SQM told IM
all production facilities were restarted by the first quarter
of 2011 due to recovery in demand.
Nobody expected the recovery,
so we needed to reopen those mines because the demand was so
strong that we didnt have any inventories, said SQM
spokeswoman Isobel Bendeck. We are now at full capacity
with the four mining operations.
We are seeing a very strong
recovery in demand now, but we do not have more capacity,
Due to the increase in demand for
iodine and the relative lack of new supply coming on stream,
SQM plans to increase capacity to 14,000 tpa, up from 12,000
tpa, by 2014.
The improved market conditions were
reflected in SQMs second quarter results. The
groups Iodine and Iodine Derivatives division increased
sales by 35% year on year to $117.2m.
This is more than double the
revenues for lithium products - an industry in which SQM
is also the worlds biggest producer.
One of SQMs competitors in Chile, Atacama Minerals, hired
a new management team in October to try and turn the company
The first major task for the
incoming team, which was brought in from Vancouver-based Red
Back Mining, is to expand capacity to take advantage the strong
market conditions. Atacama Minerals produced 1,256 tonnes at
its Aguas Blancas mine in 2010 and expects to produce about
just over 1,000 tonnes in 2011.
Our team is aiming to
reinvigorate the Aguas Blancas operation. We aim to at least
double production in the next 12-18 months to an annual
2,000-2,300 tonne range, the companys new
president, Simon Jackson, told IM.
At the same time, we are
targeting industry average costs, which will lead to a solid
margin and earnings for our shareholders, he added.
The company reported net losses in
2010 and the first half of 2011, with profits last
year impacted by the appreciation of the Chilean peso and
higher costs for mining contractors.
Atacama Minerals expects the
expansion to cost $15m. The majority of new capacity will come
from the agitated leach plant, which is in its final
We are confident that our
team can implement these changes and deliver a significant
increase in production. At the same time, our exploration team
Ð also ex Red Back - are aiming to double the reserves
in the next 12 months, Jackson said.
Another Chilean mining company, ACF
Minera, is also expanding its production capacity through a
joint venture with Japanese trading group Toyota Tsusho
The companies have jointly invested
in the Algorta Norte project in Antofagasta state to produce
4,000 tpa iodine - around 13% of current global
In May 2010, Toyota announced it
had invested ´6bn ($77m) for 25.5% stake in project,
which has reportedly cost a total of $110m.
A source from the Chilean iodine
industry told IM that the Algorta Norte
project was officially inaugurated on 15 November.
According to a local media report,
the project will be fed with water from a 75km sea pipeline and
three pumping stations.
Chiles second largest
producer, Cosayach, has also been investing in expanding
capacity, but is faced with more pressing challenges.
The family-owned company has a
nameplate capacity of 7,500 tpa iodine, which is mined at three
operations: Negreiros (40%), Soledad (40%) and Cala Cala
The operations produce an iodine
solution which is brought by trucks to the Cala Cala refinery
to produce prilled iodine or iodine flakes, as well as a
by-product of nitrates.
The biggest challenge facing the
Atacama Desert producer is a lack of water, which has limited
production to around 4,000 tpa under normal conditions.
The company reached record capacity
of 500 tpm during 2007, but will this year produce about 4,000
tonnes in total.
We have been trying to expand
capacity, said John Porter, commercial manager, mining,
at Coyayachs parent company Grupo Errazuriz. We
have invested substantial amounts of money in mining equipment
and new trucks.
We used to have 35-tonne
trucks; we now have 65-tonne vehicles. We have improved a lot
the mining yields and the mining costs as well, but
unfortunately we have not been able to increase output
As a matter of fact, we have
reduced production over the last three years because of a lack
On top of the long-term lack of
water, Cosayach has a more acute problem in the form of water
Over 20 illegal water wells
installed near the Cala Cala operation were shut down by the
government in September, according to local media reports.
In the understanding of the
authorities, some of our sources will not be recognised as a
legitimate water source under the water code, Porter
We have been using water
under the mining code, but when there is a scarcity of water it
looks like some rights are stronger than other rights. So we
have to close some of our wells, which have been operating for
over ten years now under the mining code.
Cosayach said it is working with
authorities to find a solution to the problem, including buying
more water rights and putting up a seawater pipeline.
The seawater pipeline should
be in operation by the beginning of 2013 Ð for 250
litres/second - which is enough to produce 3,000 tpa of
iodine, said Porter.
Until the water issue is
solved, we might have to reduce our production for about 30-40%
from current levels - from 4,000 tonnes to 2,500 tonnes. In my
personal opinion, this should be solved in the second quarter
According to an industry source in
Chile, a fifth Chilean iodine producer named Bullmine started
production three months ago.
With a project located near Iquique
city in northern Chile, Bullmine is thought have exported two
or three containers to the US East Coast.
Their nominal capacity is
1,500 tpa if they ever solve the ever-present problem of water
shortage, the source told IM.
The US iodine industry has historically been centred round the
south-central state of Oklahoma, where iodine extraction
started in 1977. Three companies now extract iodine from
natural gas wells in the deep subsurface of the Andarko
The largest plant is operated by
Iochem and is located near the town of Vici in the northwest of
The plant reportedly has a capacity
of 1,500 tpa, which is largely sold as part of a long-term
contract to German pharmaceutical company Schering AG.
The Woodward iodine plant is owned
by Japans largest producer Ise Chemicals Corp., while
North American Brine Resources operates a smaller plant in
A fourth producer, Iofina Inc. has
started small-scale operations in the states of Texas,
California, Montana, Oklahoma and Wyoming.
The group uses a proprietary
wellhead extraction technology, which is comparable to that
used in the iodine-gas fields in Mobara, Japan.
Iofina will also offer the
technology to third-party producers on a contract basis,
meaning the company has the capability to expand production
without acquiring further properties.
Iofina is very small, but
they have an interesting technology, which can be operated on a
truck trailer or a modular basis, said David McNeill,
senior analyst at London-based Roskill Information
If they can increase the
numbers of truck trailer and modular units in the field they
can process more brine and obviously produce more iodine. In
five years time they may well be a much more important
producer than they currently are, he added, estimating
Iofinas current production at 100-150 tpa.
Chile, Japan and the US together
account for about 95% of global iodine supply. The worlds
fourth biggest producer, China, produces iodine as a co-product
in the extraction of sodium alginate from seaweed.
Commenting on the possibility of
new major players in iodine supply, McNeill said:
Azerbaijan has been planning a major expansion in output
for well over a decade, the same with Turkmenistan.
They could conceivably reach
1,000 tpa each and may become steadily more important,
McNeill said, but added: Theres no long-term reason
why Chile wont continue to dominate.
Iodine spot prices had been largely stable for years until
2011, trading in a range of $28-34/kg (95% min, drums).
Demand growth was steady leading up
to a blip during the global economic crisis in 2009, when the
need for iodine dropped by around 15%. This was countered by a
9% drop in supply from Chile in 2010 - production fell to
about 15,800 tonnes from 17,400 tonnes Ð keeping prices
The start of 2011 saw prices creep
up to the high end of the historical range to $32-34/kg, before
the Japanese earthquake on 12 March created an environment in
which the spot market rocketed.
In the days following the
earthquake, it transpired that the catastrophic event had a
twin impact on the iodine market, which would see spot prices
triple over the subsequent months, hitting $80-95/kg by the end
The damage caused by the earthquake
and tsunami at the Fukushima Daiichi nuclear power plant in
northern Honshu caused radioactive iodine to leak into Japanese
food and water supplies.
This triggered worldwide panic
buying of potassium iodide tablets (KI) as far away as the US
and Europe. The pills are used to reduce the ability of the
thyroid gland to absorb and retain radioactive iodine.
Speaking to IM in
late March, when spot prices had risen to $40-50/kg, an iodine
producer said: The spot price spike is a knee-jerk
reaction to the panic buying of KI because of the Fukushima
nuclear plant situation.ÊIt will likely normalise as soon
as the situation is under control.
Demand was strong before the
crisis due to production shortfalls in the US and Japan, this
just exacerbates the shortage as stocks are snapped up and
production rates will have to play «catch up« for a
few months, the source added.
An iodine consumer in May said that
KI was becoming available on the spot market, but was
almost impossible to buy just after the
Unfortunately for iodine buyers,
the supply shortfall situation was exacerbated further by a
second effect of the earthquake.
Industry sources reported that
damage from the earthquake had disrupted iodine production and
supply within Japan itself.
The industry is located near to
coastal Chiba prefecture to the east of Tokyo, and is the
worlds second largest iodine production hub after the
caliche deposits in Chile.
Producers in Japans iodine
industry include Ise Chemicals Corp. and Godo Shigen Sangyo
Japanese production was disrupted
for at least three months after the earthquake, industry
sources claimed, although Japans producers did not
release any information on the damage.
Industry participants questioned
told IM that Japanese production has still not
recovered and that a lack of supply from the country could
become a longer-term issue for iodine consumers.
Michele Favre, research director at
Chile-based consultancy SignumBOX, said: Japanese
producers have not recovered from the earthquake, and we can
expect some time before we see their production at
SQMs Isobel Bendeck said the
impact on the market was not as bad as many in the industry had
At the beginning after the
earthquake, customers thought there would be a big, big
constraint in supply from Japan, she told
But we have seen that in
reality there is only a little bit less iodine supply. People
at first thought that they would sell 1,000 tonnes less in
2011, but in reality they only sold about 400 tonnes less. So
no big, big jump there, Bendeck added.
Should Japanese production recover
to pre-earthquake levels, producers there are unlikely to
increase capacity further in the coming years.
Japanese producers have been
operating close to their estimated nameplate capacity in recent
years. Output was last reported as 9,282 tonnes in 2007 from an
estimated capacity of 10,700 tpa, McNeill said.
Japanese plants have to cope with
corrosive brine and some with processing chemicals such as
chlorine. This means that plants require regular expensive
maintenance, which is a key reason why Japanese production
costs are thought to be higher than those in Chile, McNeill
explained. This is offset to some degree by the revenue brought
in by their natural gas production.
There have been no reports in
recent years of Japanese companies increasing iodine capacity
and they may have been concentrating on producing natural
gas, said McNeill. The recent increase in iodine
prices, if sustained, may encourage some Japanese producers to
increase capacity if they consider the required investment
Nevertheless, iodine spot prices
continued to rise throughout the year, with widely varying
quotes depending on the source of the product and the type of
Iodine is still trading in small quantities on the spot market
in a range of $80-95/kg with larger container loads trading at
lower prices. Many industry sources believe prices will soften
in 2012, but supply disruptions Chile could keep the market
Even though we have seen
higher prices, we had not seen an increase in production. In
Chile, producers margins have not increased in the same
proportion as prices. This is mainly because they are facing an
increase in energy and water costs, said Favre.
World-leading producer SQM expects
the average price to be even higher next year as the contract
prices move higher to mirror the spot market.
The Chilean group sets its volume
contracts for a full year, but renegotiates contract prices
quarterly. Around 75% of its sales are contracted, with 25%
going through the spot market.
Bendeck said: We have seen
constraints in the local market. That is also why there is a
scarcity of iodine in general and why the prices are increasing
The market is growing at
historical levels but there is less iodine in the market,
SQM believes the average price for
2011 - contract and spot - will be in a range of
$38-40/kg, up from $27/kg last year.
Next year average prices
could be over $40/kg - $40-45/kg maybe but not more,
For the remaining part of
this year and next year, prices will stay at higher levels. In
2013, I dont know what the quantity of iodine in the
market will be, but we are seeing a little bit of constraint
this year and next year, she added.
John Porter of Cosayach said there
was no doubt that global prices will be
strengthened by his own companys supply
Iodine and its derivatives are used in a diverse range of
applications, with no single end use accounting for more than a
fifth of global demand.
There are no substitutes for iodine
in the majority of its uses, which is a big advantage to iodine
producers amid todays sky-high prices.
Research group Roskill expects
demand for iodine to rise by an average of 3.5% a year to 2014
driven by optical polarising film (OPF) for liquid crystal
displays (LCD), x-ray contrast media and biocide
The number one application, with
about 20% of the world market, is x-ray contrast media. This is
used to enhance the visibility of structures and fluids in
Industry commentators expect x-ray
contrast media will be a solid area of growth for iodine demand
over the next decade driven by developing countries in Asia,
Latin America and Africa.
Another major application expected
to drive iodine demand is OPF, which is used in LCD
The main demand growth in
Asia is going to come from OPF. Virtually all it is made in
Asia, in either Japan, Taiwan or South Korea. But that assumes
everyone is going to stay with LCDs rather than move over to
plasmas or OLEDs, said McNeill.
OLEDs and plasma are
currently more expensive than LCDs but the differential is
likely to narrow in the future. However, LCDs are expected to
remain the most commonly used technology for at least the next
five years, he added.
Iodine used in x-ray contrast media
and OPF is increasingly recycled. Roskill estimates that global
secondary iodine capacity is 5,000-7,500 tpa and that over half
is located in Japan. Much of the rest is controlled by SQM and
recycled waste from OPF production in Asia. Bayer is also known
to recycle waste produced from x-ray contrast media production
SQM also noted the rise of
recycling, saying in its review of the industry: Iodine
recycling is an increasing trend worldwide.
Several Japanese producers
have recycling facilities where they recover iodine and iodine
derivatives from iodine waste streams.
SQM said that iodine recycling at
present is related to LCD consumption, and represents about 15%
of global sales.
It is estimated that 70% to
75% of the world recycling was done by Japanese iodine
producers, the Chilean group added.
legislation in the US is supporting the use of iodine-based
chemicals as pesticides in agriculture.
The use of methyl iodide
(iodomethane) is replacing methyl bromide (bromomethane), which
has been banned under the Montreal Protocol and phased out by
my most countries over the last ten years.
Methyl iodide is now registered as
a pesticide in the US, Mexico, Morocco, Japan, Turkey and New
Zealand and its approval is pending in several other
The pesticide, manufactured by
Japan-based Arysta LifeScience Corp., has proved controversial
among some US scientists and environmental groups. The
substance is a known carcinogen.
Arysta argues that the chemical,
which has been used in some US states since 2008, has not been
associated with any illnesses. Opponents claim the effects of
exposure could take up to 10 years to show up.
Historically, the main applications
for iodine have been in the pharmaceutical industry, which now
represents about 13% of global demand.
Pharmaceuticals are still an
important market for iodine. Demand in this area tends to be
steady and is likely to follow overall changes in global
GDP, said McNeill.
While the use of potassium iodide
(KI) for anti-radiation tablets spiked this year, the
application only represents a small fraction of iodine use.
McNeill explained: The amount
of iodine consumed in anti-radiation tablets is very small in
terms of overall demand.
There will probably be a
short-term increase in iodine demand to restock KI but the
amount of material consumed is likely to be under 100
Although iodine is without
substitutes for many applications, its use in disinfectants
could come under pressure amid higher prices.
One Europe-based iodine consumer
told IM: There are some areas of iodine
usage where this element cannot be replaced. But in some fields
it can be replaced by other products.
For example, using iodine as
disinfectant - even though iodophores have many advantages
over other disinfectants, the current price makes it hard to
compete with other similar products, the source
Although there are many factors
that will influence demand for iodine over the coming decade,
it is the supply side that will most affect the industry in the
Consumers faced with price hikes will be hoping for an end
to production problems in Chile and Japan, along with capacity
expansions from both new and established producers.