Cracks on the surface?

By Siobhan Lismore-Scott
Published: Monday, 22 April 2013

The ceramics industry may have suffered on the back of bearish demand and flagging construction, but the sector’s major players are eyeing BRIC markets, while making expansions and acquisitions in far flung corners of the world, as Siobhan Lismore, Editor, discovers

Today most of us will have got up, made ourselves breakfast, brushed our teeth and had a shower before getting dressed and going to work. In performing this simple daily routine, we will have engaged with several industrial minerals and several end markets including, of course, ceramics (see Industrial Minerals April 1989).

Ceramics are so much a part of our everyday life it seems inconceivable that this is an industry which is suffering. But several large ceramics producers have reported dismal results during the past 12 months, while China, the world’s largest ceramics producer, has imported fewer industrial minerals slated for the ceramics market.

A stumbling Eurozone, the US fiscal cliff and a contracting global economy have impacted all industries - but there are some areas of growth in ceramics. India, Brazil and South East Asia, for example, are all seeing investment, and expansions are taking place.

Europe slows down

The economic downturn and the euro crisis has, unsurprisingly been felt in ceramics markets. In Italy, which has traditionally been a large end user of ceramics minerals (see box on minerals p58), the industry has seen a gradual - and then drastic slowdown.

The Acimac Studies Centre (Italian Ceramic Machinery and Equipment Manufacturers’ Association) released preliminary 2012 year-end figures in February which showed that the Italian ceramic machinery industry had a fall in turnover in 2012.

The slowdown in world growth is prompting cautious forecasts for 2013, the industry body added.

The Italian ceramic machinery and equipment manufacturing industry ended 2012 with a small fall in turnover, after a strong performance in the first six months of the year, Ceramic Industry magazine reported.

Preliminary year-end figures published by Acimac put the sector’s turnover at around €1.6m ($2.1bn*), down 8.6% from 2011 but 15.4% higher than in 2010.

“Since September, we have been seeing a widespread downturn in the various world markets,” Fabio Tarozzi, Acimac chairman, said.

“The dynamism displayed by several countries is offset by the slowdown in a number of longstanding export markets such as Iran, China, India and Brazil. This makes us very cautious about making forecasts for next year,” he added.

China dominates

China is well known as a ceramics hub and consumed more than 250m tonnes of ceramic minerals raw materials for production of ceramics products in 2010. These include bentonite, soft-ball clay, hard-ball clay and ceramic grade kaolin, according to research undertaken by Eileen Hao Consultancy.

China imports around 40,000 tpa of refined ceramic clay, mainly ball clay, from Europe, South East Asia, the US and New Zealand, Hao explained during the 21st IM Congress in Budapest in March last year.

It also has to import zircon, ceramic-grade spodumene concentrate and borates.

In 2010, China imported 731,704 tonnes zircon, of which around half was used to produce zirconium silicate and ceramic opacifiers. It imported almost 250,000 tonnes of borates, mostly from Turkey, and approximately 225,000 tonnes of boric acid.

Zircon

Iluka Resources, the world’s largest mineral sands and zircon producer, reported a sharp fall in zircon consumption in ceramic tiles - its largest end-market - in its 2012 results, with this being felt particularly in China.

Modernisation of tile production methods, thrifting and substitution of zircon are contributing factors to this, the company said.

Zircon sales fell 58.4% year-on-year (y-o-y) to 213,800 tonnes, with sales in the second half picking up slightly to 126,400 tonnes from just 87,400 tonnes in the first half of the year.

“Iluka’s observation [...] would suggest that these practices, some of which have had a structural effect on zircon demand, have largely worked through,” the company said. According to Iluka the practise of modernisation, thrifting and substitution (MTS) while making porcelain tiles has been more evident in recent years, especially in China.

“In 2012 especially, the industry has seen three demand effects at work: destocking, lower manufacturing output and MTS practices,” the company said.

MTS has been noted in Europe over the last decade, the company said, but it is only recently that China started to also follow this trend.

Porcelain tiles, which constitute 70% of global zircon consumption for tiles, use the highest zircon density amongst ceramics products.

Italian polished porcelain tiles typically have the highest amount of zircon (300 - 1,000 grams/m3) while polished porcelain tiles in China fall within the range of 10 - 540 grams/m3.

As prices fall, it added, this trend in the zircon-based opacifier could be somewhat reversed.

The weighted average price for zircon for the year was $2,080/tonne, but given the major declines in the second half of the year, the price during Q4 2012 was $1,449/tonne.

“Continued market competitiveness in December led to some further reductions in prices,” the company said.

Sources previously indicated to IM that prices have now slipped down as low as $1,300/tonne in some regions.

“It is evident that a number of customers Iluka deals with believe that a stabilisation in zircon pricing is a necessary precursor to significant demand resumption following recent sharp declines in pricing, which have made planning of production, raw material purchases and flow-on customer commercial arrangements very challenging,” Iluka said.

While minimal inventories of zircon were held directly downstream of Iluka, a destocking and working capital adjustment phase has been evident in the ceramics manufacturing sector, the company added.

This, combined with the adoption of modern tile-making techniques in China, as well as some level of thrifting and substitution, had an impact on global zircon demand.

China production

Chinese tile production in 2010 was significantly ahead of any other country and accounted for 44% of the global market that year, with 4.2bn m2 produced in comparison with 753m m2 in Brazil and 550m m2 in India, according to Ceramic World Review.

Chinese ceramic output in 2011 reached an estimated 29.8bn pieces, of which 206m was sanitaryware and 9bn was ceramic tiles, according to Roskill Information Services, which sourced information from the China Ceramic Industry Association, China Building Ceramics & Sanitaryware Association and Eileen Hao Consultancy.

Production of ceramics tile increased to a 44% share of world production in 2011 from a 39% share in 2006, Roskill’s figures show.

China’s output of tiles is expected to grow to 9.5bn m2 by 2015, Roskill said, while tableware is expected to reach 32bn pieces and sanitaryware 210m pieces.

Porcelain tile is the main ceramic tile produced in China, Eileen Hao Consultancy data shows (see table).

But where else has there been significant growth in the ceramics industry?

 
Positive growth in ASEAN region

Thailand’s Siam Cement Company (SCG), the world’s second-largest ceramics producer, saw demand increase in 2012, with 133m m2 of ceramic tiles sold across all its subsidiaries. While final quarter 2012 sales volume dropped 1% quarter-on-quarter to 32m m2 sold, this was still 18% up y-o-y. A total of 105m m2 of tiles were sold in 2011.

SCG has a total ceramic tiles production capacity of 225m m2, of which 48% is in Thailand, followed by Vietnam (33%), Indonesia (14%) and the Philippines (5%).

Revenue from sales increased 21% for 2012 y-o-y, “as a result of the growth in the residential markets (renovations and new homes), in addition to the consolidation of ceramics plants in the Philippines”, the company said in a presentation to the market.

EBITDA (earnings before interest, taxes, depreciation, and amortisation) and net profit also increased in 2012, by 32% and 100% respectively. EBITDA was at Thai Baht (B) 6,661m ($227.5m*) and profit at B2,949 ($100m) in the company’s building materials segment.

The company pegged this on an increase in Thai domestic construction activities, with a slide in Q4 on the back of “seasonal factors”.

It expected strong demand in Thailand for the first quarter of 2013 and some recovery in the housing market.

Construction made up 49% of FY 2012 earnings, the company said. Tellingly, of the B23,580m ($805m) earnings, 11% came from building materials. This is compared with 5% of the earnings share in FY2011.

The company is seeking to expand in ASEAN countries, it said, and in December 2012 made an 85%-acquisition of Prime Group in Vietnam.

Prime Group operates six ceramic tiles plants with a total capacity of 75m m2, and is one of Vietnam’s leading domestic producers with a local market share of approximately 20%.

It also possesses other key assets, such as a clay mine, sand mine, and feldspar mine, which are all key raw materials for the production of ceramic tiles. It also has a clay roofing plant with a capacity of 1.5m m2.

In December 2012, Imerys Ceramics (Thailand) Ltd. acquired Ceraminas (Thailand) Co. Ltd, a Thai feldspar producer in order to further strengthen its leadership position as a trusted industrial mineral supplier in Asia. Established in 2001 close to the main ceramic producing area (Ayutthaya Province, approximately 100km North of Bangkok) Ceraminas has a wide range of products for ceramic manufacturers and glass makers in Asia including: potash and soda feldspar, quartz powder and silica flour.

Imerys Ceramics Thailand was already present in Lampang with ball clay facilities and in Ranong with kaolin operations. The head office located in Bangkok hosts the sales force and the Asia Technology Group, the research and development centre dedicated to customer applications.

The importance of BRIC

The significance of BRIC countries (Brazil, Russia, India and China) was underlined by Spanish group Roca Group at the end of 2011, when it noted that Brazil had become the company’s top market, overtaking Spain for the first time.

At the time, Roca, which is the world’s largest producer of ceramics in terms of revenue, put this down to the flagging construction industry in Spain.

This was underlined by Armando Ibaňez, president of Cevisama.

“In today’s economic environment, international markets are no longer an option: they are an absolute need. Until domestic demand affords new growth prospects, Spanish companies must look to emerging economies, and the international marketplace in general, for opportunities to grow or even hold their own,” he said in his opening address to this year’s event in February.

In a presentation at IM’s Congress in Budapest last year, Roskill showed that EU ceramic tile production had fallen from a 21% share of global output in 2006, to around 11% in 2011.

Perhaps in response to this, Roca opened in October 2011 a new vitreous china sanitaryware plant in the Santa Luzia II factory complex in southeastern Brazil.

“This new factory [...] will boost our production capacity in Brazil by 15% to 12.8m articles a year. It will also increase the production capacity of the Santa Luzia complex to 4.2m units, making it Roca’s largest production centre in the world,” the company said at the time.

India emerges

India produced 617m m2 of ceramic tiles in 2011, 12.2% up on the previous year, making it the world’s third-largest producer country after China and Brazil.

In response to this, Imerys Ceramics India, the Hyderabad-based company subsidiary of Imerys Ceramics, said earlier this year that it would be expanding its blending platform facilities at Nadiad, Gujarat in north-west India, to customise products required for sanitaryware and tile makers, and assist customers in their formulations. The same platform is now being used to develop various products for other ceramic industries like tableware and electrical-porcelain.

The company also recently expanded its Hyderabad facility to 200,000 tonnes from 150,000 tonnes, it added.

Abu-Dhabi headquartered RAK Ceramics, the world’s largest ceramics producer, is hoping to expand its sanitaryware activities further in India and expand its tile capacity in Bangladesh, it said in its AGM held on 28 March 2013.

The company has a global annual production of 117m m2 of ceramic and porcelain tiles, 4.5m pieces of bathware and 20m

pieces of tableware. In February 2013, it announced that it had

sold 50bn items of sanitaryware, with 1.05m pieces sold in the last quarter of 2012. The company’s growth was attributed to ceramic tiles.

RAK Ceramics recorded Emirati Dirham (Dh) 3.3bn ($9m*) in revenue in 2012, of which Dh 370m ($100.7m) was bathware and the rest ceramics. It exports to more than 160 countries worldwide.

The importance of India as a ceramics producing hub was also emphasised by the recent acquisition of Indian Ceramics by Messe MŸnchen India (MMI-India) - one of the largest trade companies in the world.

Indian Ceramics are exhibitors for technology and materials for the ceramic industries of the entire sub-continent and surrounding region.

“Looking at the explosive growth in the real estate and infrastructure sector, and the need for more and more sophisticated end products, the potential for the growth of this show is enormous” Darryl Dasilva, CEO MMI-India, said.

* Conversions April 2013

Marble residue and waste used for tiles?

In an article for Interceram, Manuel Miguel Jordan argued that municipal solid waste and marble residue rich in calcium carbonate could be used to make bricks and roofing tiles.

This, he suggest, would reduce pollution and save costs. In tests, the

author found that it was possible to produce modified tile bodies close in quality to conventional market ceramic products.




Action elsewhere in ceramics-associated sectors

Kasia Patel

Talc


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%). 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.

Talc production in 2010 was estimated at around 6m tonnes globally, with 18 companies accounting for 75% of production, nine of which are in China. Talc production from China remained stable at 2m tpa, and accounted for about one-third of world talc production. Of the 6m tpa talc produced in 2010, 75% came from 18 companies. Luzenac Group accounted for 15% of global production, followed by Mondo Minerals with 13%. 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, transferring to Imerys 15% of the world’s talc production capacity it held before. The acquisition complemented Imery’s existing calcium carbonate and kaolin supply to the paper, paint and plastics and technical ceramicc industries.

Source: Ian Wilson, Independent Consultant, UK

Wollastonite

Wollastonite is used primarily in plastics and rubber products, ceramics, metallurgical applications, paint and friction products, and its uses vary depending on the length-to-width ratio of fragments, otherwise known as the aspect ratio. Ceramic applications use low aspect ratio (LAR) grades of 3:1 or 5:1 wollastonite, or powder grades, used for their chemical composition, where its low coefficient of thermal expansion reduces shrinkage, cracking and crazing.

The wollastonite industry is very concentrated, with few large international players. Mining is carried out by a small number of producers, which dominate global trade in wollastonite. The leading producing countries are China, which produced around 300,000 tonnes in 2011, and India, where production increased slightly to 150,000 in 2011 from an estimated 145,000 tonnes in 2010. The US also remains an important producer, accounting for approximately 12% of world production.

India accounts for 22% of global wollastonite production from two companies - Wolkem India Ltd and Galaxy Corp. According to Wolkem, the wollastonite market in India is growing at a rate of 10% per year, driven by the ceramics, building material, friction and polymer industries. Galaxy Corp. supplies India’s domestic ceramics markets, with its products also used in paints and plastics. The company produces approximately 10,000 tpa wollastonite from its mine in Rajasthan, in Northern India.

Singapore-based wollastonite exploration company Auzminerals considers the global wollastonite market a relatively stable one, forecasting a growth rate of 4-7% per year, driven specifically by increased demand for wollastonite in India and South East Asia for ceramics, friction products and plastics.

Kaolin

Asia is now the leading regional kaolin producer in the world accounting for 28% of output in 2011 compared with 23% in 2007. The main changes from 2007 to 2011 are a reduction in production from the US and the UK and a re-assessment of Chinese output. According to the USGS, kaolin output from the US fell to 5.77m tonnes in 2011 from 7.11m tonnes in 2007, with exports decreasing to 2.49m tonnes in 2011 from 3.3m tonnes in 2007.

2011 output for Chinese kaolin is estimated at around 4m tonnes. A detailed market study identified 3m tonnes production, including both hydrous and calcined clay, of which the market split is dominated by ceramics (39%), paper (23%), paint (18%), plastics (5%) and others (15%).

China is now the leading producer of paper, porcelain, sanitaryware and tiles in the world, with kaolin consumption increasing significantly during the past decade. Much attention has been paid in China to finding suitable coating clay deposits as much of the higher-quality kaolin is imported from Brazil and the US.

The trend of consolidation of the major kaolin producing companies in recent years continued into 2012 with Imerys’ acquisition of Goonvean and KaMin’s purchase of CADAM SA from Vale. The 15 major producing companies operating in 1980 consolidated to 12 in 1990 and are now down to just six. Imerys is the market leader with KaMin, Thiele, Sibelco, AKW (Quartzwerke) and BASF being the other participants.

KaMin, Thiele and Imerys have large operations in Georgia, US, which is the world’s largest producing area of kaolin. Brazil has risen rapidly in the past 30 years from having virtually no coating-clay production to an overall capacity of 2.8m tonnes Imerys is the leader, providing mostly the paper market, and the remainder is controlled by Brazilian producer CADAM.

Source: Ian Wilson, Independent Consultant, UK and Imerys.



Imerys buys Goonvean

Kasia Patel

The last independent UK kaolin producer disappeared in November 2012 as Imerys SA announced the acquisition of Goonvean’s kaolin activities in Cornwall, giving the company access to additional high-quality reserves for porcelain and other ceramics, and platy clays for paper filler and other markets.

Production of kaolin from south west England is around 1m tpa, just one third of totals seen in 1988, a dramatic decrease due in part to the replacement of kaolin as a filler by precipitated calcium carbonate (PCC) and ground calcium carbonate (GCC), and Imerys’ move to stop its production of coated clays from Cornwall due to better quality material available from its Brazilian operations.

In 2011, Goonvean dedicated a sales manager exclusively to drive the speciality markets sector, such as adhesives and coatings, a decision made partly due to severe demand reductions for kaolin in the ceramics and construction markets.

The Goonvean acquisition strengthens Imerys’ reserves of speciality products mainly in performance minerals and ceramics markets. It also further improves the sustainability of Imerys operations in the region, the company told IM. Production from Devon will be controlled by Belgian producer Sibelco, while Imerys will control kaolin production from Cornwall.

However, it is precisely for this reason that the Imerys Goonvean merger has recently been thrown into question as in April 2013, The Office of Fair Trading referred the acquisition to the Competition Commission (CC) after an investigation carried out by the organisation identified competition concerns. The CC will decide whether or not the acquisition will result in substantial lessening of competition in the kaolin market, in sanitaryware or in specialty applications.



Zircon

John Ollett

The ceramics industry is the principal end use for the industrial mineral zircon. Prized for its high refractive index, zircon is added to glazes as an opacifier to give a bright whiteness to ceramic products ranging from wall and floor tiles to sanitaryware.

Zircon is also used in refractories due to its heat resistance, but its relative cost sees it mostly used in high-end ceramic products, imparting greater mechanical strength, toughness and durability to ceramic bodies and glass matrices.

World supply of zircon is led by Australia (720,000 tonnes) and South Africa (380,000 tonnes), which accounted for an estimated 78% of world production in 2011, according to the USGS. China is the only other large producer, producing 100,000 tonnes in 2011.

Leading zircon producers are Iluka Resources Ltd, which is based in Australia, Rio Tinto’s Richard Bay Minerals operation in South Africa and Tronox’s mineral sand facilities in both Australia and South Africa. These producers collectively account for around 60-70% of total global zircon sand production.

Zircon sand also supports a huge processing industry, which purchases the raw sand and processes it into grades that can be used by various ceramic manufacturers and other end users. The majority of zircon is processed into either flour (95%, passing 45 µm) or an opacifier (95%, passing 5 µm).