Pricing trends remain unpredictable as 2014 approaches

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Published: Monday, 25 November 2013

Fluorspar prices to remain flat to 2016, iodine resists further drop and rare earths halt their decline

At the end of October, the global fluorspar community met in London for the annual IM Fluorspar event, where delegates heard, among other things, that fluorspar prices are expected to remain flat, or decrease, until 2016.

Using what he called “a conservative estimate”, Jon Hykawy, head of global research at Byron Capital Markets, said during a presentation that prices for acidspar were expected to average $376.86/tonne in 2014, with an estimated supply of 4.8m tonnes and demand of 6.2m tonnes.

“We’ve made the assumption that production will be maintained and the new projects that have been announced will come online,” he said.

The price of acidspar in 2015 is expected to be at $356.82/tonne, with a demand of 4.8m tonnes.

However, by 2016, demand will return to the market, reaching 5.08m tonnes and the price is expected to increase by around $30/tonne.

Driving demand will be the end of the global recession, Hykawy said, as well as a growth in consumer demand for products that contain fluorochemicals, such as Teflon.

“We’ve seen attitudes shifting in how people want non-stick products in developing economies,” Hykawy said.

Following the relatively bearish outlook from Hykawy, John Zhao, vice president of Asian fluorspar producers China Kings, said that Chinese producers of hydrofluoric acid (HF) and aluminium fluoride (AIF3) will have to increase their prices if they are to cope with the increased cost of production, government safety initiatives and labour costs.

“Producers of AlF3 and HF are fighting to survive,” Zhao said. “Production costs have increased, labour has increased, electricity and transport has also increased.”

Added to the pressure of the higher costs was government pressure to invest in beneficiation. Any plant producing above 30,000 tpa must have its own beneficiation, Zhao added.

New environmental and production laws mean that mine owners could be imprisoned if they fail to comply with these regulations, he explained.

“I don’t think the price could be any lower - that’s my opinion,” Zhao said.

The current domestic price of fluorspar in China is around Chinese renminbi (Rmb) 1,750/tonne ($287/tonne*), he continued.

According to the IM prices database, current China FOB prices are at $280-310/tonne for acidspar (wet/dry filtercake).

“The price of fluorspar, AIF3 and HF will go up for two reasons. Firstly, if we continue to run at the current price, producers will have to shut down,” Zhao said.

“Also, reserves have been used quickly,” Zhao added, pointing to a decrease of 26% of China’s high-grade deposits from 2003-2011.

“Production will not go up or down, but the price will go up,” Zhao insisted.

China Kings are the largest fluorspar producer in China in terms of reserves, holding eight mines and 918,000 tonnes of reserves.

Speaking to delegates after the presentation, IM learned that the arguments presented were probably valid, but some added that while they were interesting, it was in a producer’s interest to say prices would increase.

Iodine

For iodine, prices resisted falling below the $45/kg mark in November, despite a continuing slowdown in the market, sources have reported to IM.

When asked about reports that prices had sunk to around $42/kg at the end of September, from a previously reported low of $48/kg earlier in the month, market participants said that they had not observed such a steep drop.

European, North American and South American sources agreed that although the market has slowed down considerably during the first nine months of 2013, spot and contract prices are holding above $45/kg.

Some Europe-based sources said that prices were pushing the $50/kg boundary, while South American contacts have continued to report prices upwards of $52/kg, and even as high as $60/kg.

Other market participants have said, however, that they would be “very surprised” to discover that any buyers would be willing to pay prices above $55/kg.

“Since the beginning of the year, consumers have resisted paying these higher iodine prices and as a result, contract prices have begun to decline,” said Roskill analyst, Vincent Pedailles, in an iodine market update published in early October.

The Roskill update also pointed to an overall increased iodine output in Chile this year from Algorte Norte, ACF Minera and Sirocco Mining, although production from other major producers including SQM is expected to decline in 2013. Japanese production is stable, meanwhile, Roskill noted.

“Prices are now anticipated to remain steady according to some producers, but the market could still be slightly over supplied by new Chilean production coming on stream by 2014, keeping a lid on any price rises,” Pedailles said.

“Prices during the fourth quarter of 2013 are therefore expected to remain stable or even decrease very slightly,” he added.

Based on market feedback, IM has adjusted its prices for iodine (99.5% min, drums) to a range of $45-55/kg for both spot and contract orders.

Rare earths

Sliding rare earths prices appeared to halt their decline at the end of October having fallen by around 15%, on average, over the course of the month.

Buffering the market was the renewal of rumours that China’s State Reserve Bureau may shortly begin purchasing rare earths to create a national stockpile of the minerals, following the publication of inflated rare earth offer prices by Baotou Steel Rare Earth Co. Ltd at the beginning of November.

According to the SunSirs commodity index, Chinese domestic prices for dysprosium oxide were Rmb 1.9m/tonne ($311/kg) at the beginning of November, down 13.6% since the start of October.

Domestic Chinese rare earths prices are typically around 10% lower than internationally-traded prices.

Kaolin

Also this month, several paper chemicals companies announced price increases for kaolin.

German chemical producer BASF said it will increase its kaolin prices globally for paper applications by up to 7%, varying dependent on the product and are effective immediately.

The company’s energy surcharge policy will remain the same with the threshold at $5/mmbtu, BASF added.

Although demand for packaging products supplied by the paper chemicals has remained stable, demand for chemicals for graphic paper production, primarily in Europe and North America, feel sharply over the third quarter of 2013, the company said.

This, together with negative currency effects, lower sales prices and decreased volumes, led to a decline in sales for BASF’s paper chemicals division in Q3.

“Increasing pressure was additionally intensified by overcapacity in the market,” the company explained in its third quarter results last week.

“Despite our strict margin and cost management, earnings declined as a result of lower sales volumes,” BASF added.

US kaolin producer KaMin LLC also said it will increase its prices depending on product category and industry, effective 1 January 2013, or as contracts will allow.

The company announced that the price increases of 4 to 7% will affect its kaolin clay products for the global paper industry, as well as kaolin produced for global industrial markets.

Although the company raised kaolin prices at the same time last year, pointing to growing production costs as the reason, it did not indicate the driving factor behind the latest set of increases.

“KaMin is committed to investing the necessary resources in technology, innovation and people for long-term sustainability in order to continue to serve its paper customers at a high level,” the company said.

“KaMin’s goal is to create the greatest value for its paper customers through partnerships geared towards delivering cost effective solutions designed to reduce coating formulation cost and to optimise paper and printing performance,” it added.

The company’s energy surcharge policy for 2014, which also comes into effect from 1 January, will remain unchanged at $6/MMBTU, and incremental surcharges by product type will remain the same.

The surcharge policy applies to KaMin’s slurry, spray-dried hydrous and calcined kaolin grades sold to the paper industry worldwide.

Finally, prices for kaolin clay products for the paper industry from CADAM SA, in which KaMin has had a 61.5% stake since May 2012, are also to increase by 4 to 7% from 1 January 2014, dependent on existing contracts.

KaMin purchased a 61.5% majority ownership in CADAM from iron ore group Vale SA for $30m last year, which placed it as the second largest supplier globally of refined kaolin after Imerys SA.

CADAM’s facilities include an open-pit mine in Amapa, Brazil, a beneficiation plant, and a private port, in Para, Brazil. The mine and the plant are linked via a 5.8km pipeline for the kaolin slurry.

Prices for kaolin, as reported by IM, are between $161-209/s.ton (no 1 paper coating grade, ex-Georgia plant), while prices for kaolin, (no 2 paper coating grade, ex-Georgia plant) are between 107.5-166.7/s.ton.

Antimony trioxide

Antimony trioxide prices fell by as much as $400/tonne in early November, sources have indicated to IM.

Prices for antimony trioxide (99.5% Sb2O3) on FOB China, CIF Antwerp/Rotterdam and ex-works US bases, have slipped from a range of $9,200-9,600/tonne in October to around $9,000-9,200/tonne in mid-November.

Meanwhile, market reports suggest that a cessation in lower offer prices for europium oxide, which had been pulling values down since mid-October, mean that prices have stabilised and are likely to hold firm for the coming weeks.

Despite losing ground in October following slight value gain in September, prices of most rare earth minerals are stronger that they were a year ago, although light rare earths are continuing to suffer.



Lynas reports stronger prices year-on-year

At the beginning of November, Australia’s Lynas Corp. reported its quarterly report for the three months ending 30 September 2013, saying that the average Mount Weld basket price for rare earths increased by 14% to $21.80/kg on a China domestic basis during the period compared to the previous quarter.

“Since the end of September, the basket price on a China domestic basis has increased further to $22.89/kg,” the company added.

Lynas’ production increased in the September quarter compared with the prior quarter but remained at a low level as the group continues to make improvements to its cracking and leaching units at its Malaysia-based rare earths refinery.

Total quarterly production at Lynas’ Malaysian operations was 253 tonnes, a 76% increase from the prior quarter, with 218 tonnes shipped, an increase of 86% year-on-year. Cash receipts from sales during the period reached Australian dollar (A) $3.2m ($3.04m).

Lynas said that it believes the global rare earths market could grow at 5-6% per annum to 2020, based on demand forecasts for key end markets such as automotive, electronics and renewable energy.

*Conversions made November 2013


ONE TO WATCH

Cerium

This rare earth has lost considerable value since the price spiked in 2011; however renewed demand in the polishing market in Japan could see prices rebound in the short- to-medium term.

ONE TO WATCH

Bentonite

Drilling-grade bentonite prices are not expected to move before the end of the year, but could increase slightly in early 2014, US-based sources have told IM.

After fluctuating over the past 12 months, sources suggest that some price movement will occur in the first two months of next year, but for now “prices are stable.”

As we enter 2014, according to one source, prices could increase 3-4%, while another suggested pricing will remain flat into next year.