Chinese talc: domestic development drive

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Published: Wednesday, 28 November 2012

Exports losing competitive edge in world market

by Dr Jia Xiuzhuang

SUPPLY SECURITY

Talc is found in 15 provinces in China, with Liaoning, Shandong, Guangxi, Jiangxi and Qinghai as the most prominent areas, accounting for more than 90% of the total reserves. Liaoning, Shandong and Guangxi are the main production areas for white talc, although different volumes of white talc reserves have been discovered in Ningshan and Zhen’an in Shanxi, Luanchuan and Fangcheng in Henan, Xiangfan in Hubei, Putian in Fujian and Kumishi in Sinkiang.

Jiangxi is rich in black talc, produced mainly from Guangfeng, Yushan and Shangrao, with higher whiteness after burning, predominately for the ceramics market. Shanglin in Guangxi, Qixia in Shandong, Shimen in Hunan and Chongqing also produce black talc, but due to a negative geographic location and traffic conditions, talc resources in Qinghai have not yet been mined in scale.

Figures for 2010 show a total of 126 talc mining areas with a reserve of 7.5m tonnes, basic reserves of 153m tonnes, stock reserves of 141m tonnes and proven reserves of 267m tonnes. Provinces with reserves of more than 1m tonnes are: Jilin (1.2m tonnes); Liaoning (62m tonnes); Shandong (17m tonne); Guangxi (8.2m tonnes); Jiangxi: (31m tonnes); Hunan (2.8m tonnes); and Shanxi (1.2m tonnes).


Source: Ian Wilson




Talc deposit types

There are four main geological types of talc deposits in China. Firstly, there are regional metamorphic type talc deposits, which can shape qualified talc deposits on a large scale. Examples of these are the Fanjiabaozi talc deposit of Haicheng in Liaoning, the Jizhua talc deposit of Longsheng in Guangxi and the Xujiadian talc deposit of Haiyang in Shandong. The first two of these are super-large deposits.

The second type of deposit is pyrometasomatic talc, found in the Sidaohongshan talc deposit of Jinta in Gansu, Nantong talc in Chongqing and the Zhenwei talc deposit of Shanglin in Guangxi.

Thirdly there are ultra basic rock hydrothermal alteration type talc deposits, such as the Kumishi talc deposit of Toksun in Sinkiang and the Mangya talc deposit in Qinghai.

Finally, sedimentary type attaclay (talc clay) and black talc deposits are found in the Jijiaoyan attaclay deposit of Xinhua in Hunan. Black talc can also be discovered in the Sinian System, for example at the Guangfeng black talc deposit in Jiangxi.

There are a total of 43 talc deposits in China (the main deposits are shown in Table 1) with eight large-sized deposits with reserves of more than 5m tonnes, 17 middle-sized deposits (reserves of between 1m-5m tonnes) and 18 small-sized deposits. In addition, super-large deposits with reserves of more than 10m tonnes include Fanjiabaozi of Haicheng in Liaoning, Jizhua of Longsheng in Guangxi, Liboshikuang of Qixia in Shandong, Xitan of Guangfeng in Jiangxi, Pingtang of Heyuan in Jiang, and the west mining area of the Mangya deposit in Qinghai. White talc with high-end quality accounts for 30% of the total reserves.

There are more than 200 talc processing enterprises in China, 70% of which are small scale. The main manufacturers, which account for just 5% of the total producers, but 80% of total output are: Gulin Guiguang Talc Development Co. Ltd; Guangxi Longguang Talc Development Co. Ltd; Guangxi Longsheng Huamei Talc Development Co. Ltd; Shandong Pingdu Talc Mine Industrial Co. Ltd; Laizhou Talc Industry Co. Ltd; Shandong Qixia Talc Co Ltd; Liaoning Aihai Talc Co. Ltd; Liaoning Beihai Industrial Group; Haicheng Xindai Mineral Co. Ltd and Haicheng Shuiquan Talc Co. Ltd.










Exports

Chinese talc output was about 1.85m tonnes in 2011, as shown in Table 2. The talc export volume in 2011 was 680,000 tonnes at a value of $160m. As this represents just 0.008% of total Chinese export volume, it suggests that talc is a low-value, small-scale mining industry in China.

Guangxi, Shandong and Liaoning are the main areas for talc export. The volumes broken down into crude talc and ground talc exports show that Guangxi accounts for 56% and 25%, Shandong for 9% and 6%, Liaoning for 35% and 69% respectively.

Equipment for processing talc in China mainly includes roller mill, table mill, impact mill and jet mill. There are currently 300 roller mills for processing 400 mesh products; 10 table mills and 10 impact mills for processing 800 mesh products; and 70 jet mills for processing 1,250 mesh and above products. The annual processing capacity of micronised products (as 1,250 mesh) is 350,000 tonnes. It is anticipated that in the future there will be an increased use of table mills to replace roller mills, and jet mills will be developed on a larger scale and will be more automated.

Talc is a relatively low-value, small-scale mineral. As an ordinary filler, it is applied to reduce production costs, and shares identical application fields as calcium carbonate and kaolin.

On a global scale, talc is not considered to be a rare resource, so excessively high prices will lead to a fall-off in use or result in its replacement by other kinds of fillers. Talc’s market share is now less than 5% and is declining, showing its weak position in the filler sector.

China is the only country in the world that imposes export duties, export quotas and lawful inspections on talc, and views it as a strategic resource.

But the low export levels show that its development will be led more through market regulation to reflect the value and realise the best exploitation of the resource.

The Chinese talc industry has changed considerably recently as the export structure moves from crude talc to ground talc and micronised talc with high added value. Demand for high-grade products now exceeds supply, which is a reversal from previous trends, while aggressive competition between rival enterprises no longer exists. The export price has been climbing gradually since 2000, with an average annual increase of around 10% for the past five years.

Labour and production costs are increasing, while various taxes and duties have also risen, which has seen the prices for the majority of products increase by between three and five times since 1996. Prices of some export products are now close to or even higher than the international market prices and many low- to medium-grade goods are now no longer internationally competitive. The problem which needs to be resolved is how to regain a competitive position in the global market, but with taxes and fees likely to add 40%-45% to export costs in the second half of 2012 and 50% to low-grade products, this is not going to be easy.




SUPPLY RISK

From a policy perspective, five questions relating to the sustainable development of Chinese talc industry need to be addressed:

1 Chinese talc’s position needs to be reviewed. Talc in China is overstated as a product of strategic importance via the systems of quotas, export duties and lawful inspection. The following regulations now apply to talc:

Compensated export quota has been in place since 1996;

According to the Announcement on Export of Talc Mixtures in the customs announcement in 2008, mixtures containing more than 50% talc are regarded as talc (Tax Regulation No. 38249091);

5% to 10% export duty has been collected since 2009;

Ground talc under Tax Regulation No. 2526202001 was adjusted as products concerned with food additives in 2012.

2 Encourage ground talc export and control crude talc export. Currently, crude talc and ground talc export policies share no essential difference with both subject to export duties and export quotas. Export duty for ground talc include 5% and 10% ad valorem duties, resulting in a situation where products with high added value have a higher export duty. This has not reflected the national basic policy of encouraging the export of finished products and controlling the export of raw materials. Export is the most important market for Chinese talc. The Go Out policy, which encourages Chinese companies to invest overseas, must be carried out in the future, and products with high added value and deep processing need a broad international market. Chinese talc products have a position in the international market, but by fully utilising its advantageous resources and processing techniques, China can do better. A healthy and steady export market is important to the sustainable development of the industry. Current export policy should encourage enterprises taking part in global markets to seek more development opportunities. If the export duty for ground talc was cancelled and retained only on the export duty for crude talc, completion of finished goods worldwide would be improved and simultaneously protect domestic resources.

3 Encourage the utilisation of global talc resources and make the import channel of crude talc accessible. China has the world’s largest talc processing capacity, but the shortage of domestic raw materials has blocked industrial investment and development. The failure to resolve material supply means no further development of the Chinese processing industry is possible. Raw material shortages in Liaoning and Shandong alone are more than 100,000-150,000 tpa, which can only be satisfied by imports. Raw materials in surrounding countries have an obvious price advantage to domestic reserves, which is an opportunity China must seize. China should strive to take advantage of the global resources, but crude talc imports are not currently encouraged. Exports carry a 5%-10% duty, while for imports, a 1% duty is collected. Import duties should be cancelled to make the import channel of crude talc accessible and assist the development of the Chinese talc industry.

4 Promote the comprehensive utilisation of resources, especially low-quality talc and chlorite. According to the Announcement on Export of Talc Mixtures in the customs announcement (Tax Regulation No. 38249091), mixtures containing more than 50% talc are regarded as talc. Even if the talc content in the mixture is lower than 50%, but occupies the largest proportion, these mixtures will still be regarded as equal to mixtures containing 50% talc and will therefore still be subject to export quotas. However, there is no tax number for talc mixtures containing less than 50% talc, so exports are not possible. There seem to be no advantages in restricting low-grade product exports. There are only limited domestic uses for low-grade talc and chlorite, while steady demand exists in the international market. Restricting exports will only result in large-scale overstocks, waste and environmental pollution. A new tax number for the mixtures containing less than 50% talc should be established to define clearly that no matter whether the talc content in the mixture is at the upper range, the mixture should be labelled under the new tax number.

5 Cancel the regulation to control industry-level talc products in accordance with requirements for food additives. Adjustments were made to the Directory of Lawful Inspection on 1 January 2012, and management conditions for ground talc under Tax Regulation No. 2526202001 were regulated as products concerned with food additives. This adjustment is significant.

Ground talc under Item 2526202001 refers to micronised talc, which has industrial applications including plastics, painting and paper making, and is listed as an industrial product. Industry talc has no requirements for hygienic indexes and heavy metals, which is precisely the inspection focus for products with food additives. Once the standards for food additives are applied to industrial talc, all products will not qualify and cannot be be exported. There is no need for this to happen. The fact that export enterprises develop and produce micronised talc will increase the added value of the products, complying with the policy of effectively utilising mineral resources, and should be strongly supported. In the six months since it has been applied, this regulation has directly resulted in unnecessary cost increases and longer lead times.

The appliance of management conditions for food additives to micronised talc under Tax Regulation No. 2626202001 should be cancelled, or failing that, the commodity inspection body should give the go-ahead notice in accordance with the application description issued by the exporters and Letter of Guarantee for Inedible Products.

PRICE TRENDS

Chinese talc prices have been rising since 2000. In the past three years, the increase was kept at around 10%, which is higher than that of other countries in the corresponding period. These rising talc prices reflect the market supply-demand situation, as well as the increase in production and export costs in the country. There is an increasing global demand for white talc while supplies in China are decreasing, and this misbalance between supply and demand is not anticipated to change in the near future.

Talc has become to be seen as a product with high energy consumption and high pollution, yet restricted by resource and with a changing export policy. In 2003, export rebates were reduced, and all rebates were cancelled in 2006. By 2009, 10% of the export duty was being collected. Another important factor for price rises is the 23% appreciation of Chinese renminbi RMB against the US dollar since the exchange rate system was reformed.

By 2012, the price of talc in China hit the limit that the talc market could seemingly bear, and indications are that there is no further room to rise. Price increases may have been accepted in the first half of this year, but the second half and going into 2013 will be more difficult.

A decrease in the domestic market in the second half of the year is expected to see demand fall by 30%. This is unlike the financial crisis of 2008, as not only is there a contraction in the international market, but now domestic consumption is also declining. It is predicted that the talc industry in China will see a far more stagnant market in the second half of 2012 compared with 2008. At present, prices of crude products in China are higher than that of other surrounding developing countries, and prices of some medium- and high-grade goods are close to, or even higher, than international market prices. The majority of low-grade goods may soon be uncompetitive in world markets due to high prices.

An important feature of Chinese talc exports is the use of export quotas and bidding methods. Qualification of bidding enterprises and the bidding measures have to comply with relevant regulations in Quota Bidding Measures for Export Goods and Implementing Regulations for Export Quota Bidding of Industrial Products. Goods covered in talc export quota management include:

Crude talc HS: 25261020

Ground talc HS: 25262020.01

Ground talc HS: 25262020.90

Mixture with more than 50% of talc by weight HS: 38249091

In recent years, the export quota volume has been kept at between 610,000 and 680,000 tonnes. The volume was reduced to 400,000 tonnes in 2009 following the global economic crisis. The export volume rose to 610,000 in 2010, increased to 680,000 in 2011 and was maintained at that level in 2012. A total of 40 enterprises received bidding qualifications and obtained corresponding export quotas, of which 25 are manufacturing enterprises and 15 are trading companies, with a respective export quota of 54% and 46%.

In addition, 150,000 tonnes of talc and chlorite are exported annually, mainly from Liaoning and Shandong. Talc mixture refers to wastage after talc sorting, mixed with various amounts of talc and other associated ores in a large proportion. These mixtures are mainly exported to Japan, South Korea and Southeast Asia. According to current regulations, talc mixtures containing more than 50% talc are regarded as talc, and require an export quota.

Chinese ground talc is mainly exported to Asia, with crude talc shipped to Japan, Europe and North America. Primary Asian import countries include Japan, South Korea, Thailand and Indonesia, while main European and American import countries include the US, Italy and the Netherlands.

China is the world’s largest talc exporter, although it is notable that talc imports have increased significantly in recent years. In 2011, the import volume was up to 50,000 tonnes, with 19,000 tonnes of ground talc. The main import countries include the US, South Korea and Italy, with consumption mainly in the Yangtze River delta and the Pearl River delta. By 2011, import prices had reached $955/tonne, compared with an export price of just $188/tonne. In 2011, 30,000 tonnes of crude talc were imported, mainly from Pakistan, North Korea, Egypt and India. The reason that ground talc needs to be imported is because Chinese product quality fails to satisfy production requirements, while crude talc is imported as its price is the same or lower than prices in China.

MARKET OUTLOOK

The Chinese talc industry is striving to abandon the old pattern of aimlessly pursuing production volume and expanding production scales. As an industry relying on resources, current growth in production volume will shorten the life of these reserves. The industry has begun to accept the concept of protecting resources and the environment, and has started to follow a path of sustainable development.

Mining resources will now be exploited on the basis of environmental protection. In recent years, a combination of improved mining approaches, creative mine-selection technology and updating of old processes, has seen new mineral resources exploited in a more efficient way. Detailed production grading and improved multipurpose utilisation rates of mineral resources have provided proof that talc production can be kept at a steady level of 1.75m-1.85m tonnes for the next five to 10 years.

In the past 30 years, exports have been the main motivation behind the development of the Chinese talc industry. In the future however, domestic market demands will exceed export demands and become the main driving force for growth.

In 2009, China was the number one producer of paper, coating, automobiles, household appliances and ceramics. These markets also appeal to the main application fields of talc and have great market potential. The Yangtze River Delta and Pearl River Delta are regarded as the leading consumption areas. Future market growth will be in plastics, especially PP plastics for the automobile industry, household appliances and packaging products, and the annual growth rate will be maintained at 5%-10%.

Contributor: Dr Jia Xiuzhuang is a certified business executive and secretary-general of the Chinese Talc Producer Association.

Acknowlegdements: Dr Chen Congxi (member of the key laboratory for land and resources strategic research in Ministry of Land and Resources) and Liu Xiangrong (China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters) assisted in the preparation of this article.


At a glance: global talc

Source: Ian Wilson, consultant

Talc production in 2010 is estimated at around 6m tonnes globally, with 18 companies accounting for 75% of production, nine of which are in China. Talc production from China remains stable at 2m tpa, and accounts for about one-third of world talc production.

The Indian talc industry continues to grow and is now the world’s second-largest talc producing country, with a 14%-share of the market. Pakistan and North Korea are being developed as new sources of talc, although the majority of new talc is being produced in Afghanistan (3% market share in 2010), which is then exported globally via Pakistan.

Pakistan has four talc mining areas with a total production of 165,000 tpa talc, and talc from North Pakistan is processed at CapriCorn’s Karachi facility along with talc from Afghanistan. Once processed, high- quality pure white talc is then exported globally.

South Asia is a major white-talc producing region, with the Indian state of Rajasthan playing host to major players such as Golcha Group, Golcha Associated Group, Jai Group and 20 Microns, while Afghanistan is also growing as a source for international high-quality talc.

Due to detailed Russian talc exploration carried out in Afghanistan in the 1970s, awareness of Afghanistan’s talc deposits has existed for a number of years, although it is only recently that development of the industry has been encouraged as part of the US Aid programme in the country.

Despite the dangers the area poses, talc mining in Afghanistan is being developed to obtain the high-quality, high-whiteness talc, which is in great demand. Investment in heavier equipment is underway, as much of the existing mining taking place is currently very basic.

Production estimates for Afghanistan vary between 200,000-300,000 tpa or more depending on the source, and so further information is necessary to provide an accurate estimate.

Production from the US remains stable and it retains a 10% market share via four major companies; Imerys, SMI, IMI-FAB and American Talc. Production totalled 455,000 tonnes in 2010 according to the USGS, with an additional 241,400 tonnes worth of imports, of which 60% was utilised in the plastics industry.

The largest bulk of talc imported into the US was supplied by China (44%) in lump form at average price of $191/tonne, while 38% of imported material was supplied by Canada with a cost of $358/tonne for processing talc.

The USGS reported a 20%-increase of talc imports into the US in 2011, with China and Pakistan accounting for most of the increase, although it is believed that around 30,000 tonnes was used to replenish inventories with not all of the material entering commerce.

Major players

Of the 6m tpa talc produced in 2010, 75% comes from 18 companies. Imerys accounted for 20% of global production, followed by Mondo Minerals with 13% in 2010. However, the talc industry was altered by two large acquisitions in 2011.

In October private equity group Advent International Corp. finalised its acquisition of Mondo Minerals, which produces around 800,000 tpa talc, from HgCapital for an undisclosed amount.

Talc de Luzenac also changed hands in 2011, acquired by France-based Imerys from Rio Tinto for $340m giving Imerys a total of around one-fifth of the world’s talc production capacity. The acquisition complemented Imery’s existing calcium carbonate and kaolin supply to the paper, paint and plastics industry.

Although Imerys recently reported a drop in 2012 global paper production of 0.3% compared with the previous year, sales for the company’s performance minerals in filtration business - which includes the consolidated Luzenac Group - saw increases of 36.6% for 2012 so far.

CEO Gilles Michel believes that the paper industry is decreasing in business and conceded that the streamlining wave in the paper industry was probably not yet over. The sharp increase the company saw in demand for talc was attributed to the growing use of talc in the automotive industry, compensating for “cycle related effects” from the economy.

End markets

The declining use of talc as a filler in the paper industry has been more than offset by good growth of the use of talc in polymers, especially for automobile parts, according to industry sources.

Under-the-hood automotive parts, such as those for heating, ventilation and air-conditioning, require high-aspect ratio talc - preferably high-purity grades - to perform over a wide temperature range.

The largest global end market for talc is still paper, which accounts for 34% of the mineral’s end use. The second largest is the steadily growing polymer market, accounting for 23%, followed by ceramics, 15%, and paint, 12%.







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