Prices for titanium dioxide
(TiO2) feedstocks saw unprecedented rises during
2012, leading to increased profit margins for many existing
producers and improved project economics for junior
The increases were not driven by
mining costs, which have stayed the same at around
A$538-700/tonne for rutile and syn rutile, according to Iluka
Resources, but driven more by limited supply in a booming
end-use industry when there were no alternatives that could be
As was the case with its
complementary mineral, TiO2 pigment, feedstocks
started 2012 strongly, but waned in the latter half of the year
when prices and demand for higher-grade feedstocks fell.
Storming out of the
The first quarter of the year
brought strong results from the largest feedstock producers,
Rio Tinto, Iluka Resources, and Exxaro Minsands (Tronox), as
profits soared on high prices and solid supply. Iluka alone
reported a 53%-increase in sales for the fourth quarter of
The group, which is based in Perth,
Australia, posted revenues of A$434m ($449m) for Q4 2011, up
from A$283.4m ($293m) during the corresponding period in 2010.
Annual sales rose 76% to A$1.54bn. ($1.6bn).
As the TiO2 pigment
industry grew and developed, so too did its feedstock supply.
2012 was a year of supply evolution as existing producers
ramped up and new producers approached production.
Of the stable, big-three feedstock
producers, two were in the news this year following changes in
ownership. Rio Tinto finalised its $1.7bn purchase of a
majority stake in leading TiO2 feedstock producer
Richards Bay Minerals (RBM) in March, bringing its stake up to
The acquisition was for BHP
Billitons 37% stake in RBM, with the remaining 26% owned
by a consortium of local communities and businesses (24%) and
RBM employees (2%), in line with South Africas
Broad-Based Black Economic Empowerment legislation.
Tronox also finalised its purchase
of Exxaros minsands assets on 15 June 2012, completing a
process that started in 2011.
Under the agreement, Tronox
acquired all of Exxaros minsands operations, which
include Exxaros 50%-interest in the Tiwest JV with Tronox
in Western Australia, along with 74% of its KZN Sands and
Namakwa Sands operations in South Africa.
While ownership was changing, other
smaller producers began major upgrades of their production
facilities to take advantage of market prices.
Far East producer IRC Ltd ramped up
its ilmenite production by installing new separators for the
material from its Kuranakh mine, bringing capacity up to
Established producer Kenmare also
continued with the upgrade of its Moma mine in Mozambique. The
company started two dry-mining operations of 1,000 tph to
supplement production, which slowed due the dredge encountering
some clay-rich horizons.
The overall expansion is designed
to increase capacity by approximately 50%.
In Australia, Matilda Zircon also
commissioned its second short-term mine - Lethbridge South - in
the Tiwi Islands with all of the heavy minerals content
pre-sold to Tricoastal Minerals.
Sierra Leone-based Sierra Rutile
also reviewed the potential for a new dredge and settled on dry
mining, which it expects will start production before the end
Sierra Rutile is targeting 28m
tonnes of ore at its dry-mining project and aims to produce
30,000-35,000 tpa ore during an initial five-year period.
Ukrainian ilmenite producer Velta
LLC made its first commercial shipment of ilmenite from its
mining and processing complex in central Ukraine during Q2. The
company is now ramping up to the planned annual capacity,
according to Andrei Brodsky, company CEO.
Next year could also bring up to
four new projects online and the effect of this new capacity,
coupled with existing market weakness could further hamper the
Problems in the sector became more
apparent by the end of the second quarter. Iluka Resources
posted large falls in demand, with demand for rutile and
synthetic rutile hit hard as sales-volume forecasts dropped
11-38% and 29-45% respectively. The company sold just 186,500
tonnes rutile and syn rutile for the first half 2012 compared
with 246,100 tonnes in the first half of 2011.
As the second quarter
progressed, softer demand for pigment and pigment inventory
build began to be reported, reflecting lower European demand
and weaker global export flows of pigment, the company
The industry had begun to falter by
the third quarter. Titanium dioxide pigment production had
fallen due to weak end-user demand and the dramatic feedstock
price rises during 2011 meant that many pigment producers were
unwilling to keep their inventories high.
Pigment producers began to move to
a just-in-time system, whereby inventories were kept to a
minimum level and only topped up when absolutely necessary.
Another effect of 2011s price
hikes saw pigment producers begin to switch to lower-grade
feedstock mixes where possible during Q2 2012.
In another development, pigment
producers with multiple plants that were no longer operating at
capacity slowed production at plants with higher-grade
feedstocks and compensated by running ones on lower-grade
What this meant was that rutile and
synthetic rutile - the two highest- grade feedstocks - saw a
serious drop in demand and prices. Titanium slag and ilmenite,
on the other hand, remained more stable, but eventually the
fall in demand began to affect them too.
The heavy weight of
A severe problem that has built up
around the industry is excessive inventories of feedstocks
waiting for separation or shipping. Many feedstock producers
are finding it difficult to unload these volumes and, as a
result, are having to slow production at the mine site.
Feedstock companies that have the
capability, such as Iluka Resources, have switched production
to the lower-grade parts of their deposits to slow output while
retaining the staff they will need when the industry picks up
Future for the
The feedstock industry has
undoubtedly struggled during 2012, and will continue to do so
early in 2013. Its profitability is linked to its main end
market, the downstream pigment industry, and will only begin to
pick up when that industry picks up, which is predicted to be