Potash price turbulence; further TiO2 price hikes anticipated

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Published: Tuesday, 27 August 2013

The fall-out from a sombre round of second quarter earnings continued to be felt in mineral markets this month, with producers in the chemicals sector, in particular, announcing price increases to limit the impact of falling revenues and rising costs.

By IM Staff

The fall-out from a sombre round of second quarter earnings continued to be felt in mineral markets this month, with producers in the chemicals sector, in particular, announcing price increases to limit the impact of falling revenues and rising costs.

The torrent of gloomy earnings news continued with mining giants Rio Tinto and Vale announcing results, as well as a host of smaller mineral companies which joined in the chorus of profits under pressure.

Potash

August was a turbulent month for the potash industry, with leading potash producer Uralkali pulling out of its export sales arrangement with Belarusian Potash Co. (BPC), following a disagreement on export activities.

A company spokesperson confirmed to IM that competition in the potash market is likely to increase with prices falling by the end of the year (see pp 10-11).

“[Increased competition] will put pressure on the price that might go to under $300/tonne by the end of H2 2013. Still the price is likely to remain higher than $200/tonne, which is the cost of production for marginal potash producers,” the spokesperson said.

Responding to the stock market volatility caused by Uralkali’s announcement, Moody’s Investors Service has said that the market response had been an overreaction, and that prices are more likely to fall to $350/tonne.

“To say that prices will go down to $300/tonne is a very strong overreaction on the price,” Moody’s assistant vice president, Sergei Grishunin, told IM.

“No one knows how prices will behave. Any forecast of price is merely speculation. The only thing we can say is that the volatility will probably increase in the short term but in the long term I think all parties will find a solution,” he added.

Grishunin also said that should prices drop to the levels Uralkali has suggested, they will not remain there for long, and that pricing is expected to be closer to $350/tonne over the medium term.

Fertiliser producer Israel Chemicals Ltd (ICL) said the announcement may “change potash market dynamics and create pressure on potash margins”.

SiC/polysilicon

Spot prices for polycrystalline silicon (polysilicon) - one of the main feedstocks used in solar cells - have contributed to demand fluctuations for other industrial minerals, including silicon carbide (SiC), IM reported in August.

In the first quarter of 2012 spot prices of polysilicon were hovering around the $30/kg mark, having fallen 60% in 2011 on the back of major overcapacity.

Analyst forecasts for 2012 predicted that prices would then fall further and reach a low of at least $20/kg by the end of the year.

“Spot prices did reach that level in the fourth quarter; however they fell significantly to around the $15/kg range before stabilising in December,” Mark Osborne, senior news editor at PV-Tech, told IM.

Despite the negative impact tumbling polysilicon prices have had on smaller producers, all is not lost from a wider solar market perspective, according to Fatima Toor, who works in Lux Research’s Solar Components division.

“I think closure of the smaller Chinese polysilicon companies is actually a good thing for the industry since it will bring up the price of polysilicon to a sustainable $24/kg to $30/kg in the next 12 months,” she explained to IM.

“The current sub-$20/kg prices are not sustainable given that the cost of Siemens polysilicon production is $20/kg to $25/kg for large players and for smaller players around $25/kg to $30/kg, so any company selling below $20/kg is not making any money in this business and the overcapacity is dragging the entire industry down,” Toor said.

TiO2

Leading titanium dioxide (TiO2) pigment producer Huntsman Corp. has said that it anticipates further price hikes for TiO2 pigment during the year.

“We are hopeful that we will get more significant increases (...) towards the end of 2013 and into 2014, as inventories fall,” CFO, J Kimo Esplin, revealed to analysts this month.

However, Huntsman believes that it will not require significant price increases to reach its normalised run rate, and noted that TiO2 pigment prices have begun to settle after a weak 2012 for pricing.

“We are seeing price stabilisation for TiO2 as a result of lower industry inventories and improving demand [and] we expect margin improvement in the second half of this year,” said CEO Peter Huntsman.

Elsewhere, titanium slag producer TiZir Ltd saw its sales for H1 2013 rise by 11% y-o-y to 80,600 tonnes slag, produced from its Tyssedal plant in Norway.

Prices for titanium slag however, continued to soften and during first half 2013, and were on average 30% lower than full-year 2012 levels.

Bromine

US-headquartered Chemtura Corp. said that prices for bromine and bromine-based products continued to remain weak during the June quarter of 2013 as a result of slow demand from traditional consumers.

The company said that prices had been particularly weak in Asia, where Chinese bromine producers continue to have excess production capacity due to lower electronics demand.

The company anticipates demand for bromine chemicals to increase in the second half of 2013, however; there is limited visibility as what that rate of improvement will be.

US speciality chemicals producer Albemarle Corp. also announced this month that it will increase prices for elemental bromine and hydrobromic acid (HBr) for customers located in India, China and other parts of Asia by 25%, effective immediately.

Meanwhile, Chinese chemical producer Gulf Resources Inc. said it had seen an upward trend in bromine prices during the second quarter of 2013, despite weaker demand from China’s industrial sector.

“Although still impacted by China’s macro-economic conditions, some raw materials prices are increasing,” the company said in its Q2 earnings statement.

“The average bromine price in [the second quarter] increased to $3,084/tonne, compared to $2,954/tonne by the end of 2012,” Gulf outlined.