SSR: Absorbing the economic impact: bentonite bounces back

By Emma Hughes
Published: Thursday, 26 September 2013

Bentonite is an abundant, versatile mineral found in many regions around the world. Its vast quantities and unique properties have stood bentonite miners in good stead over the past few years, as the mineral’s supply and demand situation has remained relatively secure throughout the economic downturn.

SUPPLY SECURITY

Bentonite is an abundant, versatile mineral found in many regions around the world. Its vast quantities and unique properties have stood bentonite miners in good stead over the past few years, as the mineral’s supply and demand situation has remained relatively secure throughout the economic downturn.

Global bentonite reserves of more than 10bn tonnes are mainly distributed between the US, China, the CIS, Germany, Italy, Japan, Greece, Brazil, India and Turkey (see Table 1). Most of this bentonite is of the calcium variety; global sodium bentonite reserves are thought to be less than 500m tonnes.

Interestingly, the majority of global bentonite production in 2012 was in the US, where more than 4.9m tonnes was produced, according to the US Geological Survey (USGS).

Elsewhere, according to USGS figures, Brazil produced 540,000 tonnes beneficiated bentonite in 2012 while the Czech Republic produced 180,000 tonnes (crude), Germany 350,000 tonnes (sales) and Greece 900,000 tonnes (crude).

Italy produced 110,000 tonnes bentonite in 2012, Mexico 54,000 tonnes, Spain 160,000 tonnes, Turkey 1m tonnes and Ukraine 210,000 tonnes.

China, however, which most often dominates industrial minerals supply, was the world’s second largest producer in 2012 with approximately 3.5m tonnes.

From a global standpoint, more than 10m tonnes of bentonite was produced in 2012, down only slightly from the 10.3m tonnes bentonite produced in 2011.



US success

In the US, which leads global bentonite supply, production has fluctuated from around 4.9m tonnes in 2008 to the 4.8m tonnes recorded by the USGS in 2012. Throughout this period, which encompassed the global financial crisis, US bentonite production remained above 3.6m tonnes, highlighting the mineral’s steady supply situation throughout the economic downturn.

Due to the leading production status of the US, the country has imported no bentonite over the past five years, but has exported fairly large quantities for use elsewhere in the world. In 2008 just over 1m tonnes bentonite was exported, according to USGS figures. While this export amount dropped slightly in the following years, it picked back up to 1m tonnes in 2012.

China’s significance

In China, the world’s second largest bentonite market, the country’s 12th Five Year Plan (2011-2015) for the non-metallic minerals industry has outlined consistent supply of the mineral.

The plan, which was approved in mid-March 2011 by the National People’s Congress (NPC), notes that the bentonite industry expanded at a 2.5% annual growth rate from 2005 to 2010 and enjoyed rapid development during the preceding 11th five-year period.

The country expects that this growth will continue in coming years, with predictions estimating that by 2015 the Chinese bentonite market will show an annual growth rate of 5.2%, increasing from 3.5m tonnes in 2010 to 4.5m tonnes in 2015.

Going forward, the plan outlined its intention to “support the development and application of high value-added products and encourage the development of bentonite in Ningming in Guangxi, Xiazijie District in Xinjiang, Chifeng in Inner Mongolia, etc.”

MARKET DEMAND

Bentonite is a clay mineral that expands, absorbing several times its dry mass, in water. The mineral is composed primarily of montmorillonite, a mineral of volcanic origin belonging to the smectite family.

It is mostly recognised for its sorptive and thixotropic (water absorption, colloidal, waterproofing, and binding) properties and comes in two main varieties: calcium bentonite and the more commercially-important sodium bentonite, which has many end uses and applications but few comparable substitutes.

“It is not foreseen [that there is] any significant substitution [for bentonite] from other materials; on the contrary in the future, bentonite might be able to substitute other materials which have less flexibility than that of bentonite,” S&B Group, which dedicates 50% of its business to bentonite, told IM.

These adaptable properties lend themselves to many different end-use markets, some of which have weathered the economic downturn

better than others. The five major global markets for bentonite are oil field, foundry, iron ore pelletising, civil engineering and pet litter.

In the US, out of the 4.8m tonnes bentonite produced, 30% was used for drilling mud, 27% for absorbents, 14% for iron ore pelletising, 16% for foundry sand and 13% for other uses.

Other bentonite uses include water treatment, where it is used for water clarification and sludge treatment; ceramics, due to its plasticity; and agriculture, where it can be mixed with pesticides and fungicides as a support carrier to ensure the substance sticks to the target.

Bentonite clay is also used as a supplement in animal feeds and as a colloidal additive in cement slurries, where it is used to seal off soil infiltrations and to line the base of landfills.



Other markets

Some of the larger bentonite markets, such as oil well drilling and iron ore pelletisation, are far more susceptible to economic impacts, meaning the demand for bentonite in these markets has been slightly reduced over the past five years.

Bentonite is the second most commonly used industrial mineral in drilling fluids after barytes. The average drilling mud or fluid may consist of bentonite clay carried in water, diesel or mineral oil.

During the drilling process, bentonite performs several purposes by cooling down the drill bit, tubing and the rig itself while also stabilising the drill hole, increasing the viscosity of the mud, allowing it to carry rock cuttings to the surface effectively.

Bentonite also forms a low-permeability filtercake on the wall of the drilled borehole that prevents the circulating mud from escaping through the adjacent formations. When mixed with water, bentonite disperses to form a colloidal suspension that sets as a thixotropic gel at concentrations of 1-2% by weight, thus providing the required viscosity.

Drilling fluids, or muds, can be divided into three primary types: water-based, oil-based and synthetic. Bentonite is among the most popular of the water-based fluids, and accounts for around 70-80% of the drilling grade bentonite produced.

In this market, bentonite demand can fluctuate in line with global rig counts, which are tracked by oilfield services companies such as US-based Baker Hughes.

Another oilfield leader, Halliburton, explained to IM that while the bentonite market is cyclical and demand follows the cycles of energy, housing or other major indices, the market is “mature and can be expected to grow in general relation to population growth”.

In other bentonite markets, such as foundry, the USGS estimates that bentonite sales might increase in the US for foundry sand bond in the coming years, driven by an increase in commercial and residential housing construction as the global economy begins a slow recovery.

Demand in other markets, such as those driven by consumer demand, are expected to remain steady in coming years, market sources have confirmed to IM.

PRICE TRENDS

Bentonite prices have fluctuated during the past year as a slight decrease in demand drove prices down, while increased logistics and energy costs pushed them back up.

“Along with other minerals, bentonite faces considerable cost pressures due to rising energy and freight costs,” S&B Group told IM towards the end of last year.

“Furthermore, the high demand of the mineral required the use of a large exploration programme into [difficult] mining areas, which also created a considerable cost increase of the material. As a result, bentonite prices increased considerably this year (É) more than 8%, and are expected to increase further next year so [allows] the producers to be able to cover at least partially the increased costs,” the group added.

Despite this, prices have remained steady in recent months.

Sources have told IM that they believe some price movement will occur in the first two months of next year, but for now “prices are stable,” while others believe an uptick could occur sooner.

Optimism from some market sources towards the end of 2012 was unfounded, as anticipated price increases are still yet to be seen.

One industry source told IM in November last year that increased logistics and energy cost pressures could cause bentonite prices to increase by as much as 20% by the end of 2012, while another agreed that they expected prices to rise by between 10-20% at the beginning of 2013.

“This seems high but I know bentonite producers have been having a hard time keeping ahead of cost increases,” one source divulged at the time.

However, the lack of demand caused by the economic downturn spilled into 2013 and potential overcapacity meant that prices have remained low.

In the US, prices of bentonite are thought to be around $68/tonne, according to USGS salient statistics, while prices for other areas vary (see Table 3).

MARKET OUTLOOK

For bentonite supply and demand, the future looks positive. The clay is both low cost and found in abundance around the world, making it the mineral of choice for many markets. This, coupled with the fact that bentonite has few known substitutes, makes for a stable outlook.

While logistics costs and energy issues are expected to plague low cost, high bulk industrial minerals markets in coming years, strong demand from end markets can be expected to steady the market supply situation for minerals like bentonite.

Further, while some of bentonite’s end markets are protected by consumer demand and are expected to remain consistent, other end markets, such as oilfields, are likely to grow.

Halliburton told IM that it is moving ahead with its drilling activities as the oilfield market continues to present positive opportunities and will also consider additional uses for bentonite.

“In addition to bentonite’s use as a drilling fluid additive, Halliburton will continue to explore new opportunities and activities as they are presented or conceptualised,” the company explained to IM.

Sipag Bisalta also told IM that it is expanding its range of bentonite products with chemicals in the civil engineering industry while also concentrating on new business outside Italy.


Kitty litter

One of the most consistent markets for sodium bentonite is cat litter. The mineral is selected by many cat litter brands due to its low cost and unique absorption properties.

The cat litter market has remained a steady and reliable demand source for bentonite since the 1980s, and is now the mineral’s largest market in North America.

While this may seem a less glamorous market in comparison to oil well drilling or iron ore pelletisation, it is extremely stable as demand for such as product has proven fairly constant due to its consumer market, regardless of the economic climate and was described as being potentially “recession proof” at IM’s Oilfield Minerals Outlook meeting in Houston in June this year.

In the US, cat litter was valued as a $2bn market in 2010 by Packed Facts, which found that the product actually accounted for 43% of all cat supplies retail sales during that year, with litter accessories contributing a further 2%.

According to Experian Simmons, around one-fifth of US households purchased cat litter in 2004, and by 2009 this number had increased once more to 22%, representing 84% of all cat owners.

Though not all cat litter contains bentonite, the scoopable variety, which most often contains sodium bentonite, was the most popular product of choice with 58% of cat owners opting for this variety.

Elsewhere in the world, cat litter is also a large market and, not surprisingly, there is a direct correlation between the two largest bentonite-producing countries in the world and the two largest pet cat owning countries in the world (see Table 2).