Price Briefing: Year-end company accounts show true health of minerals industry

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Published: Tuesday, 20 March 2012

By March most companies had submitted their end of year accounts with differing forecasts for the year ahead. While a producer is unlikely to emphasise a fall in sales or volume, most seen so far have been relatively bullish when mentioning prices

By March most companies had submitted their end of year accounts with differing forecasts for the year ahead. While a producer is unlikely to emphasise a fall in sales or volume, most seen so far have been relatively bullish when mentioning prices.

News out of China showed how quickly the market can change. In the space of one week the rare earths market forecast was bearish, then stable, then bullish Ð and this all from one company.

What is clear is that despite economic uncertainty elsewhere, in minerals markets there are still good times ahead.

TiO2 rising

Several leading producers of titanium dioxide (TiO2) have announced price increases of over $200/tonne. This month Kronos Worldwide posted impressive 2011 results, underlining increases in sales revenue.

“Even with reduced sales volumes, we implemented significant TiO2 selling price increases in 2011, including in the fourth quarter, and set a new record for TiO2 segment profit,” CEO Steven Watson said. DuPont, Huntsman, Cristal Global and Kronos have all announced price hikes for 1 April 2012.

Rutile

IM
heard from the rutile industry this month as sources warned that rutile prices could top $4,000/tonne in the second half of this year.

For once this perceived uptick in demand was not due to an increase in TiO2 applications but as rutile’s role as a welding feedstock mineral that is used in newer welding technologies.

Sources from the industry confirmed to IM that welding grade rutile prices Ð higher than those for pigment grades Ð are expected to increase steadily during 2012 as the industry moves towards flux-cored wire technology.

Prices for welding grade rutile, reported at $3,000-3,100/tonne during Q1 2012, are expected to continue their rise to reach $3,300-3,500/tonne during Q2 and even $4,000+/tonne during H2.

“Given that welding grade rutile is higher priced than pigment grade, we could see more feedstock producers aiming for the welding sector,” a leading mineral producer told IM.

Iodine

A year on from the Japanese earthquake disaster and some minerals are still showing the effects of market disruption.

Iodine prices had remained in a range of $29-33/kg (crystal, 99.5% min, drums, spot & contract) for two years but levels spiked following the tragic Fukushima nuclear disaster.

“The Tohoku earthquake, water shortages in Chile and robust demand combined to create a perfect storm, blowing iodine spot prices up to record levels,” IM wrote in its Iodine feature in November 2011.

Prices at the moment are at a midpoint of $75/kg for spot prices and $50/kg for contract (see graph, p.89).

But in March SQM released its results, arguing that it believed iodine prices would not come off and instead would actually continue to increase through 2012.

Rare earths

In rare earths, Chinese analysts predicted a “boom season” to occur in rare earths markets in May or June this year.

The forecasted upturn has been attributed to a perceived surge in demand for wind power, lighting equipment, LED, home appliances and air conditioners.

Analysts cited the Chinese government’s “Non-ferrous Metal 12th Five-year Plan”, announced in February, which highlighted the need to develop industries (such as those mentioned), which will require a large amount of rare earths.

Metals analysts still emphasised the need to remain cautious due to the ongoing European debt crisis, but said that the situation was expected to improve.

“It is estimated that in the second and third quarter the economics in the west will get better, which will stimulate the export of rare earths and their products and support the prices.” Wei Yishan, Shanghai Metals Market analyst forecast.

Fire sale to end

A new policy introduced by the Chinese government and available from March 2012 will see companies separated into three groups within the rare earths market: rare earth production, smelting and separation, and trading.

Each group will have to receive a code prior to submitting an invoice to the government. The government decides whether or not the company should receive the code.

As many trading companies were concerned about the application process for the invoicing system they recently partook in a “fire sale”. This is now seen to be ending and prices are expected to stabilise.

Media reports out of China stipulate that a large number of rare earths exported were done so illegally. It is hoped that the new invoicing system will curb this activity, in particular in the heavy rare earths market.

Data from consultancy the Industrial Minerals Company of Australia (IMCOA), estimated global demand for rare earths (total) in 2011 at 58,000 tpa, up from 52,500 tpa in 2010. The export quotas in 2011 from China were at 30,184 tpa. Of that, heavy rare earths made up less than 15,000 tpa, Chinese customs data shows.

Perlite

As discussed in February, perlite prices were indeed placed higher in March on the back of higher input costs. However, with demand falling off in the market, traders say prices are unlikely to continue to rise.

Perlite prices out of Europe have increased by €5/tonne, taking levels to a €70-75/tonne range, from a range of €65-70/tonne.

Volume in this market is still relatively low, with most pegging this latest increase purely on increased mine costs. Costs at the mine face have risen by between 3-5%, producers told IM.

Levels are not expected to remain high in this market, due to a fall off in demand brought on by the uncertain economic future in Europe and increased competition.

“There is more competition which should suppress any further increase and may lead to erosion of the above increase - time will tell,” one trader hypothesised.

Vermiculite

Vermiculite prices were bullish throughout 2011, and the trend appears to be continuing into 2012.

South Africa, bulk, FOB Antwerp, vermiculite prices have risen to a range of $400-850/tonne, up from $230-450/tonne at the start of the 2011.

“I expect vermiculite prices will continue to rise, albeit at a slightly slower pace. Our product right now goes exclusively to Europe,” Mark Arnesen, Gulf’s recently appointed CEO, told IM.

“As Europe pulls out of this financial crisis, which you have to believe it will, so too should the demand for vermiculite strengthen,” Arnesen added.

Antimony trioxide

Following a frisson of excitement in February, March saw antimony trioxide prices falling off, following complaints that recent higher prices were unsustainable, market sources told IM.

The price of the flame retardant mineral edged up on the back of a curtailment of supply out of China. Traders in China denied that there was a shortage of supply in the area and claimed that the price was being held unnaturally high.

Supply slowed out of China after smelters in Hechi and Yizhou city, Guangxi province, were ordered to close following a cadmium poisoning incident.

Others said that the price of antimony trioxide was coming off as there was an oversupply in the market.

“This was the first price increase in a while. But people are now seeing that the international situation is not getting better and so manufacturers are decreasing the price a little,” one source said.


ONE TO WATCH
Barytes

Anyone with half an eye on minerals markets will know that the price of barytes and other oilfield minerals has increased in line with stronger demand on the back of heightened exploration in North America. But sources are indicating that the price of chemical grade barytes out of China is also rising.

ONE TO WATCH
Rare earths

Rare earths demand within China is rumoured to be increasing. The recent drop off in prices has made it “acceptable” for several end users to pick up orders, local press reports suggest.

Magnetic material producers Beijing Zhong Ke San Huan High-tech admitted to reporters that it was replenishing stocks while prices were low. Domestic praseodymium prices are now around $53.69/kg.

ONE TO WATCH
Iodine

Despite relatively recent assurances that the iodine market has flattened out following hikes at the same time last year, recent communication with the market suggests that levels are picking up again.

“The base level has increased slightly in line with demand,” one source divulged at the end of March.


Rare earths prices



Rare earths prices



Titanium dioxide prices