Price Briefing: Titanium dioxide hikes unlikely to stick

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Published: Monday, 22 April 2013

Recent titanium dioxide (TiO2) price hikes by major producers are unlikely to be accepted by pigment endusers, analysts told IM.

Recent titanium dioxide (TiO2) price hikes by major producers are unlikely to be accepted by pigment endusers, analysts told IM.

“While TiO2 prices have come down with a variety of non-integrated producers (...) I do not see [the recently announced] price hikes sticking in the near-term,” Hassan Ahmed, of Alembic Global Advisors said.

Managing director and senior analyst at Wells Fargo Securities, Frank Mitsch, agreed, telling IM that it is unlikely that the price increases will be accepted.

“Utilisation rates need to reach ~85% to support price increases, a level unlikely to be reached until Q3 [2013] at the earliest,” Mitsch pointed out in a recent note.

These price increases are important to a number of producers which are being squeezed by high raw material costs, Ahmed explained: “If the price hikes do not stick I expect near-term profitability to be break-even to negative in Q1 2013.”

“That is unsustainable and should result in certain producers announcing another round of price hikes in an attempt to recover losses,” he added.

TiO2 pigment prices are holding in the range of $3,200-3,500/tonne (bulk volume, CIF US), according to the IM prices database.

 
Pigment producers squeezed

The industry began a steep downturn in the second half of 2012, driven by end-user destocking but it is believed that this is coming to an end: “By the end of Q1 or early Q2 re-stocking should result in more normal inventory levels. This coupled with the entrance into a seasonally stronger demand period should result in market improvements,” Ahmed said.

Ore costs however continue to squeeze pigment producers which are trapped between these escalating costs and pressure from large endusers to keep prices low.

The cost of production for the industry has more than doubled over the past 20 years, mainly due to ore costs, Mitsch recently said.

In 2012, ore prices rose approximately 65% with the most notable gains in both chloride and sulphate slag. Further gains are expected in slag while natural and synthetic rutile could see falls of around 13%.

TiO2 substitution

One prevailing concern for pigment producers is the current trend of major end-users looking to substitute TiO2 pigment for cheaper alternatives.

This has not been previously explored because TiO2 white pigment has no direct substitutes.

PPG is leading the charge and managed to reduce its consumption by 4%/can in 2012 while DOW Chemical has begun commercial production of EVOQUE extender technology which, the company says, can reduce TiO2 consumption by 20%.

A number of other production initiatives are being explored including further filler and extender technologies including CMP’s Snowpaque flash calcined kaolin which promises a reduction of up to 25%.

Barite

Prices for Chinese barite have fallen again this month as demand in drilling markets remains low, US sources have told IM.

Worldwide oil and gas exploration dropped month-on-month (m-o-m) in all major regions, excluding Latin America, during March 2013, according to oilfield services company Baker Hughes.

“Reduction in barite pricing in the market has been due to slow demand based on softness of the drilling markets,” one source said.

Barite is used as a drilling fluid additive, which acts as a weighting agent in the formation of drilling mud. The mineral increases the hydrostatic pressure of the drilling mud allowing it to compensate for high-pressure zones experienced during drilling.

The softness of barite also prevents it from damaging drilling tools during drilling and enables it to serve as a lubricant.

Although the demand for barite in the drilling market has softened, other factors contributing to price declines in China include increased competition and a call for lower-gravity barite, sources have said.

“Alternately, many new sources continue to be available from Mexico for the North American markets. Although the Mexican grades are lower specific gravity products, much of the active drilling in North America requires low weighted drilling muds and can use lower gravity barite,” one source explained.

Prices for Chinese barites, API drilling grade, unground lump have contracted from a range of $130-140/tonne to $155-130/tonne.

Chinese barites, API drilling grade, unground lump, CIF Gulf Coast have also dropped from a range of $155-160/tonne down to $147-154/tonne.

Antimony trioxide

Prices for antimony trioxide have slid lower as softer prices for antimony metal continue to put pressure on suppliers to offer cheaper source material, IM has learned.

Antimony trioxide (typically 99.5% Sb2O3, 5-tonne lots) CIF Antwerp/Rotterdam fell from a range of $9,900-10,000/tonne to $9,600-9,700/tonne, according to sources.

Price ranges also narrowed downwards for both FOB China (20-tonne lots) and ex-works USA material of the same purity, both of which fell from $9,600-10,000/tonne to $9,600-9,700/tonne.

Antimony ingot prices were unchanged, sources said, at $10,400-10,800 for FOB China, and $11,000-12,000 for CIF Rotterdam metal.

Metal makers report lower average prices

Despite steady prices for antimony ingot, sources have indicated that metalloid antimony has yet to make up ground it lost in the final months of 2012.

United States Antimony Corp. (USAC) released its full year 2012 financial statement in March, stating that it had seen an average fall of $1.19/lb ($0.54/kg) in the price of antimony.

This, the company said, had contributed to a loss of $558,536 made by USAC last year.

China’s second-largest antimony producer Chenzhou Mining saw its profit decline by 0.7% to Chinese renminbi (Rmb) 537m ($85.6m*) for the full year 2012, which it attributed to lower pricesÊfor the metal.

According to the US Geological Survey’s 2013 Mineral Commodity Summary for antimony, metal prices averaged $12,839/tonne last year, down 12.7% from 2011.

Leo Mills of London-headquartered RJH Trading told Metal

Bulletin’s Asia Minor Metals Conference in Hong Kong at the end of March said that rapid increases for antimony since 2006 had led buyers of the material to seek alternatives.

He added that economic recovery in major consuming regions would be crucial to future price strength, saying that demand from Europe is expected to be weak this year, while USA and China will be the key to price movements.

“The macro economy news from the eurozone is very unstable. USA and China will be crucial to the market,” he said.

“If the [eurozone] industry uptake increases, long-term orders for raw materials will increase and spot material premiums will rise,” Mills concluded.

Fused Zirconia

Fused zirconia prices across a range of grades have remained unchanged despite falls in zircon sand prices, sources indicated to IM.

However, the collapse of zircon sand prices from heights of over $2,000/tonne is proving beneficial to the fused zirconia industry as the reduced prices of this feedstock lead to a cheaper end-product and better profitability for the companies involved.

Energy prices still remain an important factor for fused zirconia producers and they remain vulnerable to zircon sand prices as no economically viable alternatives exist.

Monolithic fused zirconia (CIF European port), both refractory grade and ceramic grade, have remained stable at between $6,500-7,800/tonne and $3,800-4,800/tonne, respectively.

Structural ceramic/electronic grade of fused zirconia (contract price CIF European) main port has also remained steady at between $4,600-6,000/tonne.

Refractory grade stabilised fused zirconia (CIF European port) also remained at a consistent level with prices ranging between $6,500/tonne up to $7,800/tonne.

In glassmaking refractories, monoclinic fused zirconia is added with zircon to form alumina-zirconia-silica (AZS) refractories used to line glass tanks for flat glass manufacture.

Steelmaking refractories also use monoclinic fused zirconia as the main raw material for producing stabilised zirconia refractory materials.

There is no readily available substitute for zircon in over 80% of applications.

Potash

Uralkali, one of the world’s largest potash producers has said that the potash market in 2013 continues to face several challenges, highlighting India as a particular area of concern.

“India will remain the focus of concern this year. In spite of having considerable upside potential, Indian potash demand continues to be impacted by changes in retail pricing and the subsidy policy,” the company said.

In 2012, faced with a depreciation of the Indian rupee against US dollar and a reduction in 2012 subsidies, farmers found it harder to meet potash prices, leading to a drop of 40-45% in local consumption, Uralkali noted.

“In 2013, despite some improvement in potash demand, Indian imports are expected to still be well below the record 6.3m tonnes imported in 2010,” it continued.

India’s budget for FY2013/2014 was announced at the end of February, with a proposal to slash the subsidy on potash by a further 19% for FY2013/14.

The average potash price has increased by 25% year on year domestically, Uralkali said, to $254/tonne. The export price had increased only 5.4%, meanwhile, to $370/tonne.

Zeolites

United States Antimony Corp., which produces antimony and zeolite, said in its full year 2012 financial results released in March that it had sold similar volumes of zeolite in 2012 compared to 2011 (around 12,105 tonnes), but that the average sales price per tonne had increased by 25.9%, or $43.76, from $168.83/tonne to $212.59/tonne.



Market for Mining

Chris Hinde*

The world economy continued to

 
drift last year, with global growth falling to 2.3% from 3.8% in 2011 (and 5.1% in 2010). The malaise was worst in the ‘advanced’ economies, which grew by only 1.3% last year, from 1.6% in 2011. Unfortunately, the emerging, developing, countries also recorded one of their weakest economic growth rates in ten years, with an overall increase of only 5.1% in 2012.

The lacklustre economic performance was attributed to uncertainty in Europe and the economic slowdown in China, where the growth rate dropped from 9.3% in 2011 to 7.9% in 2012. This decline in GDP growth is attributed to a shift away from intensive manufacturing and capital investments, toward expenditure in the service sector (and intangible assets such as human capital).

In spite of these disappointments, a better overall outcome is projected for 2013. We anticipate an improvement in economic growth, the restoration of fiscal authority in the US, and a stronger euro zone.

*Chris Hinde is editorial director at InterraRMG, which is hosting the Mining on Top Africa event on 25-26 June 2013 in London (see p27 for details).