Chinese New Year fails to boost mineral markets

By Laura Syrett
Published: Friday, 24 January 2014

Fluorspar, iodine and lithium prices sink; Magnesia markets slow to pick up in January

Demand in most mineral markets continued to be flat to weak in January, with fluctuations in prices driven almost entirely by changes in Chinese production activity and policies.

Preparations for Chinese New Year on 31 January and the accompanying Spring Festival saw mine and plant closures across several industries, including antimony, fluorspar and graphite, which tightened supplies and prompted price increases for chemical grade antimony metal.

Weak cathode consumption by battery makers led to a softening in lithium prices, meanwhile, and ongoing lacklustre demand for iodine saw both spot and contract prices drop in recent weeks.

In more positive news, Uralkali’s Chinese potash contract for the first half of 2013 has laid a reassuring benchmark for the industry, which should keep prices for the fertiliser mineral above $300/tonne in the near term.

Antimony

Trioxide grade antimony ingot prices in China rose in mid-January as smelters closed down production lines ahead of the Chinese New Year holiday, sources told IM.

“The price is going up slowly in China; most of the mining companies have stopped work because the Spring Festival is coming,” one China-based supplier said.

“Demand is going up slowly, so the price is also beginning to move to up slowly,” they added.

An upturn in orders from Europe and the US was met by reduced availability of material from China as a result of production line closures.

Chinese producers have been standing firm on offers since before the end of 2013, resisting pressure to sell material at or below cost, despite weak end of year market conditions as buyers held out for the cheapest deals.

This led to an unexpected surge in prices for trioxide grade antimony at the end of December, when buyers thought that prices had bottomed and placed large orders to take advantage of low priced material.

In-warehouse Rotterdam antimony trioxide grade metal prices stood at $9,600-800/tonne on 23 January, up from $9,500-700/tonne a week previously.

European trioxide (typically 99.5% Sb2O3, 5 tonne lots, CIF Antwerp/Rotterdam) prices fell slightly, meanwhile. Sources did not give an explanation for the decline, but said that prices stood at $8,800-900/tonne, down from $9,000-200 tonne earlier in the month.

Chinese antimony trioxide (typically 99.5% Sb2O3, 20 tonne lots, FOB China) prices were steady, meanwhile, at $8,600-800/tonne.

Standard grade II antimony metal prices had also increased to $9,500-800/tonne by 23 January, from $9,400-600/tonne, according to Metal Bulletin.

Fluorspar

In fluorspar markets, demand remained weak in January, according to information received by IM Data.

“While some have reported lower prices out of China, IM Data has not received substantial enough feedback to change our prices at present,” the data service said.

Graphite

Graphite prices were also quiet for much of the month, although prices in China may be edging

up, according to some IM Data sources.

Prices remained within IM’s ranges in January, but this may change as supplies run low China’s Spring Festival approaches.

Few are expecting any increases to be more than 5-10%, however.

Iodine

Prices for iodine fell again in January, sources indicated to IM, with large volume and contract orders showing the largest declines in value.

The fall in prices was attributed to a further weakening in downstream demand and competition between suppliers to secure high volume orders.

Iodine producers in Chile are reportedly looking to cut supply in line with reduced consumption.

South American sources reported that prices for iodine crystal (99.5% min, drums, spot and contract) had narrowed downwards to a range of $45-50/kg from $45-55/kg in December.

Other sources have suggested that values for large contracts may have slipped even further to settle below $45/kg, although precise prices for such shipments are unlikely to be publically disclosed.

Smaller orders for specialist and fine chemical applications are thought to be holding up in the $50-55/kg range, however.

Market participants believe that the market could be approaching a floor in the mid-$40s, although previous estimates had placed this floor at around $50/kg.

Lower prices are not expected to impact demand, however port strikes in central Chile, which have hit metal exports from the country, could affect the availability of iodine as early as Q2 if the action spreads to the northern ports, used to ship the mineral.

Lithium

Torpid downstream demand for lithium products has kept prices for lithium carbonate flat, while weaker conditions for lithium hydroxide have pushed prices down, IM has learned.

Battery grade lithium carbonate is used to make cathodes for lithium batteries, but Chinese producers have reported reduced consumption of these components owing to a slowdown in domestic manufacturing.

Lithium carbonate buyers are holding off from replenishing inventories as a result.

The price of Chinese sourced battery grade lithium carbonate (99% min) stood at Chinese renminbi (Rmb) 39-41/kg ($6.38-6.81/kg*) in the second half of January.

Industry grade material remained in the Rmb 35-37/kg ($5.70-6.10/kg) range, meanwhile.

Prices for lithium carbonate show no sign of strengthening in the near future as the spot market remains inactive ahead of the Chinese spring festival, market reports indicate.

Values for lithium hydroxide (56.5-57.5%), which is mainly used in greases, have suffered more as a result of the weak downstream market, with prices falling slightly from the Rmb 40-42/kg ($6.55-6.90/kg) range to Rmb 39-41/kg ($6.40-6.75).

Chinese suppliers have reportedly lowered prices in order to sell material, but the market for lithium hydroxide remains subdued, with buyers continuing to order on a hand-to-mouth basis.

Magnesia

Quiet market conditions during the last week of December and first week of January have left Chinese and European dead burned magnesia (DBM) prices steady, IM has learned.

Prices for DBM (90% MgO, lump, FOB China) were in the $240-270/tonne range in early January, sources confirmed to IM, while values for purer material (97.5% MgO, lump, FOB China) were between $470 and $490/tonne.

At the beginning of December 2013, Europe-based sources told IM that some grades of Chinese DBM had slipped as Chinese producers dropped prices in an effort to sell the remainder of their export quotas before the end of 2013.

Market indicators suggest that this effect was only marginal, however, and mainly confined to higher value DBM grades.

European prices, which are typically around 10-15% higher than Chinese FOB values, were also steady after the Christmas holiday lull, sources told IM.

Prices for Europe port DBM grading at 90% MgO were reported as being between $275-285/tonne; 92% MgO material at $295-305/tonne; and 95% material at $415-425/tonne.

North American DBM prices are down slightly, however, with average values for 95% MgO material reported to be between $530-550/tonne, down approximately $10/tonne from mid-2013.

Reports from Chinese operators have said that both spot market and contract enquiries have been slow to get going, with buyers holding off from making purchases to see which direction prices will begin to move this year.

While Chinese market participants have suggested that prices could strengthen from February as market activity begins to pick up, North American sources have said that there are few signs that prices will increase as demand conditions for the refractory mineral remain difficult.

China and Europe-sourced caustic calcined magnesia (CCM) prices were steady meanwhile, sources indicated, with Chinese CCM (90-92% MgO, FOB China) reported as being in the $235-245/tonne range, and European offers at around $265-275/tonne.

Fused magnesia prices were also reported as flat.

Potash

The world’s largest potash producer, Uralkali, reduced its Chinese contract price for the fertiliser mineral by almost a quarter year-on-year (y-o-y) on 20 January.

The Russian miner set the price at $305/tonne for the first half of 2014 for a supply volume of 70,000 tonnes, a value 24% less than the $400/tonne contract that expired in July between China and Belarusian Potash Co. (BPC), Uralkali’s now defunct trading arm.

Uralkali’s contract with China, the world’s largest potash consumer, is seen as a benchmark by the bulk of market participants.

Setting this at above $300/tonne should lift the rest of the market, which weakened considerably after Uralkali pulled out the BPC trading venture with Belaruskali in August 2013.

Chinese spot prices for potash fell to $303-305/tonne, Uralkali marketing chief Oleg Petrov said in December. The company also said that average FCA export prices in Q3 2013 had fallen 27% y-o-y to $272/tonne.

On announcing the China contract price, Petrov expressed an optmistic view of the market: “The contracts between Uralkali and the Chinese companies clearly testify to growing demand and the beginning of market recovery,” he said.

“The terms of the agreement with our Chinese partners are mutually beneficial and serve the interests of our consumers, agricultural producers of the PRC,” he added.

“Any deal at a price higher than $300 is a success for Uralkali,” Konstantin Yuminov, a Raiffeisenbank analyst in Moscow, told Bloomberg.

A reconciliation between Uralkali and Belaruskali has been mooted by analysts. A reformation of the trading scheme could see prices lifted further, as greater certainty returns to the potash industry.

Rare earths

Prices for rare earth minerals increased slightly in early January after ending 2013 on a low, if steady, note, having lost ground made up during a brief market rally in November.

Internationally traded prices for cerium oxide increased from a range of $4-6/kg to between $5.40-6.80/kg, while dysprosium oxide has risen from $310-350/kg to between $450-525/kg, values quoted by Chinese sources indicate.

Lanthanum oxide prices rose from $4-6/kg to $5.60-6.20/kg; neodymium oxide prices increased from $40-60/kg to $69-72/kg; and praseodymium oxide prices were up from $75-90/kg to $120-134/kg.

All prices quoted were for minimum 99% pure material on an FOB China, bulk basis.

At the beginning of the month, the Chinese government approved a plan to consolidate China’s rare earths mining sector which saw the country’s largest producer, Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co., take control of nine smaller mining companies.

These policy changes have prompted speculation that the reforms could underpin higher rare earths pricing in future by increasing domestic values for the minerals and tightening their global supply.

Titanium dioxide, rutile and zircon

ASX-listed Iluka Resources said in mid January that it had seen a material reduction in prices for zircon and high grade TiO2 products in Q3 2013 (See p 16).

“Zircon prices commenced 2013 materially lower than 2012 levels and remained stable for much of the year before softening slightly in the fourth quarter, with a resultant weighted average annual zircon price for 2013 of $1,150/tonne, a reduction of approximately 45% y-o-y,” Iluka said.

“Weighted average rutile pricing declined during 2013 by approximately 56% to $1,069/tonne, associated with the weak demand for high grade titanium products,” it added.

The company also said that zircon sand inventories held by customers fell to low levels towards the end of last year, with buyers continuing to order on an “as required” basis and with some holding back from purchasing as prices softened marginally.

“As the traditional low season has commenced (December to Chinese New Year) muted buying activity is expected until February 2014,” Iluka said.

In high grade TiO2 markets, encompassing Iluka’s rutile, synthetic rutile and upgraded slag products, which mainly supply chloride pigment producers, these buyers continued to be burdened by high inventories built up in 2012, Iluka explained.

This has meant that demand for higher grade feedstocks remained subdued in late 2012 and throughout 2013, and Iluka said its received rutile prices were around $900/tonne in the December quarter.

Full information on all IM’s prices can be found on the IM Prices Database.

*Conversions calculated January 2014


ONE TO WATCH

Chinese DBM

Prices for dead burned magnesia (DBM) (90% MgO, lump, FOB China) are not expected to move until after the Chinese Spring Festival, but market participants expect buying activity to pick up from mid-February, which could boost prices.

ONE TO WATCH

Dysprosium

Prices for dysprosium fluctuated along with other rare earth minerals in 2013, but experts have repeatedly tipped this heavy rare earth as being a target for growing future demand.

Chinese-sourced heavy rare earths are mined in the country’s southern provinces of Hunan and Jiangxi, and in January the Jiangxi government announced it would impose price-based taxes on rare earths later this year, which could affect mineral values.

ONE TO WATCH

Iodine

Market commentators are expecting the price of iodine (99.5% min, drums, contract) to bottom within the coming weeks, although constrained supply as a result of Chilean port strikes could push prices higher temporarily.