Price Briefing: Ilmenite prices are “unsustainable” say Kenmare

By Siobhan Lismore-Scott
Published: Tuesday, 02 July 2013

This month's price briefing looks at how metspar prices are sliding on the back of weak steel markets and discusses how Lynas aims to take control of rare earths prices

Declining ilmenite prices are becoming a problem for producers of the titanium dioxide (TiO2) feedstock mineral.

“It seems to me that ilmenite producers at this level will generally lose money,” Michael Carvill, CEO of Irish ilmenite miner Kenmare Resources Plc, told IM.

Carvill doubts that current ilmenite prices are feasible in the long run.

“We don’t believe that ilmenite prices can sustain themselves at these present levels - it’s not enough. I think that they are going to have to return to higher levels,” he added.

Ilmenite prices did rise during the TiO2 feedstock pricing boom of 2011 and early 2012 - reaching more than $300/tonne - but, as with the higher-grade feedstocks, have slipped back down again, reaching as low as $264/tonne.

“Ilmenite has experienced a price decline. I think that the price decline is not as extreme as rutile or synthetic rutile because it hadn’t seen that level of price appreciation that they had,” Carvill told IM.

IRC Ltd, a Far East producer of ilmenite, has recorded prices dropping as low as $263/tonne during 2012, but picking up slightly to $274/tonne in 2013.

Strong outlook for ilmenite

There is, however, a strong outlook for ilmenite because, while rutile and the other higher grade feedstocks have seen severe supply curtailments, ilmenite supply has remained relatively secure.

Major producers Kenmare and IRC Ltd have both continued production at the same level as previously.

Ilmenite is also valuable in the sense that it is the lowest-grade and cheapest feedstock, and so there is always a solid demand base.

“There is a certain equivalency of value in the use of ilmenite because of its nature as a feedstock of titanium slag, and since chloride slag has remained so robust in terms of pricing, that has given a certain strength to the ilmenite,” Carvill said.

Metspar prices slide on weak steel demand

Metallurgical grade fluorspar (metspar) prices fell by an average of 20% through Q2 2013, due to weak demand from the steel industry.

The lack of demand in the market created an excess supply of metspar, particularly across lower-purity grades, which pushed Chinese prices down to as low as $200/tonne, according to IM Data sources.

Proportionally, the value of higher-purity grades fell the most during the past quarter. The price of metspar, min 85% CaF2 CIF China to Holland, has dropped to a range of $290-$310/tonne (down 17.8%), while the highest grade of metspar, min 90% CaF2 FOB China, has been lowered to $250-$275/tonne.

However, these price changes were not restricted to the Chinese market, with low-purity Mongolian grades falling to below the $200/tonne mark. The price for metspar, 75% CaF2 DAP Mongolian-Russian, was moved down to a range of $180-$190/tonne, after being static at $200/tonne since H2 2012.

Muted steel growth hampers metspar

Metspar is used in the production of steel, and world crude steel production has been increasing, but this is being driven mainly by Asia, with declines in most other regions.

The declines across the globe have hampered the demand for metspar in most major markets, but due to the slight upturn in Asian steel production, demand for the feedstock mineral is picking up, which may soon impact prices.

Soda ash prices increased by FMC

Soda ash producer FMC Wyoming Corp. will increase off-list soda ash prices by $15/s.ton for all grades of soda ash.

The increase will be applied to both bulk and packaged products and will be implemented 1 July 2013, or as contracts allow.

“This increase is necessary to recover cost increases and to support continued investment in the business,” the US-based company said.

List prices, on the other hand, will remain unchanged.

FOB Westvaco and FOB Granger, Wyoming list prices for bulk material will remain at $275/s.ton for dense grade, $280/s.ton for Grade 100 and $290/s.ton for AbsorptaPlus.

FOB Westvaco, Wyoming, prices for packaged soda ash list prices will remain at $340/s.ton for dense and $245/s.ton for Grade 100 in 50lb loads.

For 2000lb loads, prices will remain at $330/s.ton for dense and $335/s.ton for Grade 100.

“FMC Wyoming Corps current energy surcharge and freight policies for soda ash will remain in effect,” the company said, adding that the energy surcharge base cost will remain $7.00/mmBTU.

Lynas implement minimum price schedule

One of the only producers of rare earths outside of China, Lynas Corp., is implementing a minimum price schedule for its rare earths products, effective 1 July 2013.

The Australian company, which also operates a processing plant in Malaysia, maintained that the rare earths market will grow in the long term but only if prices rise, at its recent press conference in Malaysia.

The aggregate selling price of typical light rare earths is about $16 to $20/kg, around 25% below the minimum sustainable level for producers, Bernama, the national news agency of the government of Malaysia reported.

“Should this trend continue, the industry risks losing production and triggering a similar supply crisis to that of 2010 - 2011 when prices were driven up sharply to peak levels above $100/kg, destroying demand in many market sectors,” Lynas reportedly said.

The company said the rare earths market had the potential to grow between 5-6% annually over the medium-term.

This growth is expected to come from key sectors such as permanent magnets, automotive catalytic converters and fluid cracking catalysts.

However, these long-term growth rates required long-term pricing visibility to justify investment by customers and producers, it added.

Lynas CEO Eric Noyrez said the company believed that only prices which were sustainable for producers and customers would allow the rare earth market to grow to its full potential in the long-term.

Imerys hikes prices for US filtration minerals

One of the US divisions of Imerys, Imerys Filtration Minerals (formerly World Minerals), will be hiking the prices of all its diatomite, perlite, cellulose, and silicate products shipped within North America, effective 1 July 2013.

“The increase will range from 2-8%, subject to any provisions in individual contracts,” the company said.

The price increase supports continuing investments and rising costs in manufacturing, maintenance, quality systems and environmental compliance, it added.

As well as these increases, the energy surcharge that the company has been levying to compensate for logistical costs will remain in effect.

However, as the spot market gas prices dropped below Imerys’ base price of $4.4/m BTU (British Thermal Unit) during May, the company decided not to implement the surcharge on diatomite, expanded perlite and silicate products during June.

This fall in gas prices is thanks, in part, to the increasing production from shale oil and gas plays generated by unconventional drilling, or hydraulic fracturing.

For perlite ore, the surcharge is instead based on the On-Highway Diesel Price Rocky Mountain, which, for the month of May, was above the company’s base price of $3.30/gallon.

The price was below $3.80/gallon, so the surcharge for June was $1.23/s.ton.

European surcharges

Imerys Filtration’s European operations are also subject to surcharges but, unlike the US operations, have not seen the drop in gas prices associated with a rise in hydraulic fracturing. As such, a number of surcharges are being implemented in Europe.

For all Celite, a diatomaceous earth product, products from the company’s plant in Alicante, Spain, the energy surcharges for Q2 2013 will be €11.10/tonne ($14.75/tonne*) for calcined grades and €4.00/tonne for natural grades.

However, Celite products from the plant in Murat, France had an energy surcharge of €18.70/tonne for June 2013.

For perlite products from the company’s Barcelona plant, the surcharge for June will be €4.30/tonne and €5.50/tonne for Optimat, an alumino silicate functional additive for the paint and coatings industry, products.

Perlite products from Corsico, Italy, and Wissembourg, France, were charged Û4.30/tonne during June.

Cristal is final producer to hike TiO2 prices

Cristal has become the final chloride-route titanium dioxide (TiO2) pigment producer to announce a range of price increases for the third quarter of this year.

Prices will be increased for all of the Saudi Arabian company’s anatase and rutile products - including TIONA and other Cristal products - sold across all global regions, effective 1 July 2013 or as contracts allow, the company said.

The largest increase will occur in Latin America, where prices will be raised by $300/tonne.

Like fellow producers DuPont and Huntsman, Cristal will be increasing its North American prices by $0.08/lb (approximately $177/tonne).

European markets which use the Euro, principally western Europe and portions of eastern Europe, including Turkey, will see prices hiked by a minimum of Û175/tonne ($231/tonne).

European dollar markets, mainly eastern European markets such as Russia and the other CIS nations, will see price increases of $200/tonne.

The same range of increases - Û175/tonne ($231/tonne) and $200/tonne - will be applied to the Middle East and North Africa, which also trade in both US dollars and Euros.

The same increase of $200/tonne will be applied across Asia-Pacific. This will exclude Japan, where prices will be increased by Japanese Yen (Y) 20/kg ($203/tonne).

Nearly all of TiO2 production is sold under contract, mostly short-term, and these announced increases will not necessarily be implemented across all contracts once negotiations get underway.

This was definitely true of the first quarter this year, as the industry saw, when pigment producer Kronos announced price increases but actually saw a 7% decrease in prices over the quarter, it revealed in its Q1 results.

Similarly, all of Cristal’s announced price increases for this quarter are between 10-30% lower than the increases announced for Q2, excluding Latin America which remains at $300/tonne.

* Calculated June 2013