Zircon has had a rough ride this
year, even compared with its flagging sister industry of
titanium dioxide (TiO2) pigment and associated
While the industrial mineral, which
is used chiefly as an opacifier in ceramic and enamel glazes
for white and super-white ceramic and porcelain tiles, is mined
from the same deposits as TiO2 feedstocks, it has
different end markets and consumers. As a result, its
profitability and outlook is significantly different.
Zircon and TiO2
feedstocks both saw prices jump in 2011, driven mostly by a
global shortfall in supply and by a rise in demand powered by
the Chinese construction market.
However, it is in market outlook
where the two differ. While TiO2 pigment and
feedstocks are predicted to rebound during 2013, the zircon
market is predicted to continue to struggle due to
modernisation and substitution.
Slow out of the
Unlike TiO2, zircon was
already dipping by Q4 of 2011, and this negative picture was
compounded in 2012 by major producer Iluka Resourcess
Fourth-quarter zircon volumes
were influenced by the impact of global economic conditions on
customer confidence and on the availability of credit, together
with the effect of measures by the Chinese central government
to control inflation and temper speculative activity in some
parts of the Chinese property market, the company said in
its Q4 report.
Tronox and Rio Tinto, the other
major Western producers of zircon, agreed with this market
Iluka slashed its intended zircon
production by 70,000 tpa for the year in the second quarter,
which increased its estimated zircon unit costs for the year by
A$50/tonne ($50.72*) up to A$700/tonne ($710.27).
Iluka also indicated that zircon
demand softened in Q4 2011 and Q1 2012 due to both the global
economic situation and destocking by zircon consumers,
particularly ceramic manufacturers.
Zircon production for 2012 was
originally estimated at 500,000 tonnes, but has been reduced to
430,000 tonnes through the mining of ore at its
Jacinth-Ambrosia operation and lower production of zircon-rich
concentrate at its Narngulu and Hamilton separation plants.
China was the big story during Q2
where a serious oversupply of zircon was driven by its
declining construction industry, which is the largest in the
Zircon was stockpiled by both
traders and producers through the quarter, market source told
IM, with one source estimating this to be a
volume of between 50,000-150,000 tonnes. Prices remained steady
at the time, but have since declined, while major producers are
rumoured to be slashing output like their Western
As the zircon produced in China is
used almost solely for domestic use, this did not directly
affect external markets.
The prohibitive cost of zircon in
China has also led to new opacifier and pigment formulations,
which use at least 50% less zircon-based raw materials than
before. While mullite (calcined kaolin clay) and olivine can be
used as substitutes for zircon in the foundry industry,
substitution in the ceramics industry is more difficult.
Calcined alumina is a strong
front-runner for partial substitution and averages much cheaper
at $700/tonne (98.5-99.5% min Al2O3, FOB
refinery, US). Substitution rates of about 30% have been
reported, but as a portion of zircon must still be used, falls
in demand will be slowed.
This reduction in content is likely
to continue even when the Chinese housing industry picks up,
sources told IM.
Later in the year, Chinese
oversupply became such a large issue that major producers Rio
Tinto and Iluka Resources opted to auction zircon at a point
far below market price.
Rio Tinto auctioned around 15,000
tonnes premium-grade zircon starting at around $2,000/tonne at
the end of August, while Iluka Resources auctioned 5,000 tonnes
high-grade zircon starting at $2,150/tonne the day before
Rios move, IM was told at the time by
This was indicative of the pricing
pressure that top-tier producers (Rio Tinto, Iluka, and Exxaro)
were experiencing, one source told IM.
The result of this auction, sources
indicated, was that many buyers were hesitating to commit to
large purchases of zircon in case prices fall further.
Some companies have also had to
renegotiate their longer-term contracts with new price
offerings between $2,050-2,300/tonne.
Rio Tinto launched another auction
in Q3, but this had a poor reception, with a large proportion
The third quarter brought woes for
all the major producers. Tronox, which completed its first full
quarter with Exxaros operations integrated, saw both
declining sales volumes and prices during the period.
To illustrate the magnitude
and the effect of the weakness in zircon demand, the
[year-on-year] y-o-y zircon volume declined 74%, (...) which
equates to over $90m in lower y-o-y sales of what is a
high-margin product for us, Tom Casey, CEO, told
investors at the time.
Casey believes that zircon prices
will continue to decline, especially as volumes decline.
Iluka Resources agreed when it
reported in October that Q3 2012 production had dropped y-o-y
by more than half to reach 77,700 tonnes from 167,300
The outlook for zircon was summed
up by Philip Murphy, TZ Minerals International managing
director, at the companys (TZMI) conference in Hong
A weak offtake persist[ed
for] longer than anticipated, he said. The timing
for, and pace of, demand recovery is a major
Zircon is seeing substitution in
tiles as customers opt for polish, rather than glazes, or tiles
that use less zircon, or in some cases, neglecting to choose
tiles altogether and choosing substitutes such as glass
Also, government sponsored
construction, which is rising in China, uses tiles with much
less, or no, zircon. These may be less effective, but they are
Trading conditions [for
zircon] are going to remain tough for a while, he
Unlike its sister
industry,TiO2, no pick up is seen for zircon in the
near future, and 2013 could bring even more difficult trading
conditions if the macroeconomic depression continues.
*all calculations made in