Mining industry urged to manage price expectations for 2014

By Laura Syrett
Published: Friday, 21 February 2014

Indaba upbeat on investment prospects; chemical minerals expect 2014 market stability

Buoyant sentiment pervaded many industrial mineral markets in February, as a wave of full-year earnings results and sentiment at the 20th Mining Indaba Conference in Cape Town, South Africa (see pp8-9), pointed to improving prospects for commodity prices in 2014.

On the project finance side, banking groups and stock exchanges both predicted that the mining industry could be due for a revival in terms of financing as early as Q3 2014, although many cautioned that investor confidence would be brought back by controlled spending rather than rapid growth in the sector.

“The feeling at this year’s Indaba has been generally upbeat,” James Posnett, manager for listings and business development at the Australian Securities Exchange told IM.

“The climate for IPOs isn’t too hot right now, but during the last bust in the cycle back in the 1990s, Chinese demand wasn’t there - so the outlook for this cycle is more optimistic,” he added.

While investment prospects are tipped to improve, those with an eye on pricing warned that mineral producers will need to keep a tight grip on supply in the near term to prevent currently stagnant markets from tipping over into decline.

Foundry grade chromite, ilmenite and graphite are some of the minerals most at risk from upsets to a delicate supply-demand balance, while chemical minerals including antimony, bromine and soda ash are expected to see moderate gains over the coming four quarters.

Antimony

A Chinese government crackdown on mineral smuggling left trioxide grade antimony ingot (99.65% min, FOB China) prices unchanged at $9,600-9,950/tonne in late January.

Prices for the material subsequently rose at the end of the month to $9,700-9,950/tonne, however.

In-warehouse Rotterdam standard grade II antimony prices also rose to $9,600-9,850/tonne, meanwhile, Metal Bulletin reported.

Sources told IM that they expected an increase in trioxide grade antimony values into February, but that this is likely to be gradual.

Bromine

US speciality chemicals producer Albemarle Corp. said at the end of January that it expects prices for elemental bromine to be flat in 2014, following the stabilisation of the market towards the end of last year.

Without giving specific guidance on price levels, Albemarle’s senior vice president, Matthew Juneau, said during the company’s fourth quarter earnings conference call that the chemicals firm had seen prices weaken during 2013 but that this trend has now levelled out.

“If you look overall at pricing trends, clearly we have had some price degradation, but this has broadly stabilised,” Juneau said.

“For 2014 we expect [bromine] prices to remain flat,” he continued, adding that much depended on prices set for Chinese bromine. These are typically 5-10% lower than bromine produced in other parts of the world.

IM’s prices for bromine (purified, bulk, 99.95% Br, domestic destination, tonne lot, ex-works US) currently stand at $1.60-1.70/lb ($3.50-3.75/kg).

According to the Sunsirs commodity index, prices for Chinese bromine stand at around Chinese renminbi (Rmb) 19,250 ($3,180*)/tonne, having risen by around 12% in December 2013, but have declined slightly since the start of this year.

Juneau also hinted that Albemarle would consider raising its bromine prices if demand trends permitted, but confirmed that it had budgeted for flat prices during 2014.

Chromite

Prices for foundry grade chromite are expected to weaken during the first quarter of this year, sources indicated to IM in February.

Industry participants at the 20th Mining Indaba Conference said that buying activity for all grades of chromite had been “quiet” over the last six months, but that the slowdown in orders for foundry material was particularly evident.

Sources declined to comment on rumours reported to IM that prices for foundry grades (45-46% min Cr2O3, wet bulk, South Africa) had fallen by $70-80/tonne in January, but did say that the market had softened.

The picture was confused, however, by comments from US-based chromite producer, Amcol International, which stated in January that “pricing for foundry grade chromite appears to have stabilised”, without giving any specific price guidance.

Reasons for the apparent sluggishness in chromite orders were also unclear, although some speculated that a halt in Chinese industrial activity at the beginning of February, combined with well stocked inventories at many foundries, could be to blame.

Both foundry and refractory grade chromite prices slipped by as much as $40/tonne, sources told IM in August last year, on the back of falling demand in metals markets.

Fluorspar

Fluorspar prices entered February on a persistently stagnant note, according to IM Data, although the pricing service said it suspected that values may be higher than currently published levels.

“We are reviewing our acidspar prices, particularly out of China, but there is very little activity in the market at the moment so it’s hard to tie down a market price. We believe prices are higher than our current levels but we’re still looking to clarify the range,” IM Data analyst, Andy Miller, said.

IM’s fluorspar prices for acid grade fluorspar (wet filtercake) are currently at around $420/tonne on a CIF Rotterdam basis; $310-330/tonne on an FOB China basis; and $350-550/tonne for various grades on an FOB Tampico, Mexico, basis.

Graphite

Indications from the amorphous graphite industry suggest that the prices could be weakening, IM Data said in February, while the Chinese holiday shutdown reduced the amount of trading information available for analysis.

In the flake graphite market, prices appear to be stable, but IM Data warned that the high availability of ready-mined material could prompt prices to fall once the industry starts up again later this month.

Amorphous graphite prices are currently around $500-550/tonne on a CIF Europe basis, while the highest value flake material (94-97% C, +80 mesh) is priced at $1,250-1,300/tonne, also on a CIF Europe basis.

Ilmenite

Prices for the titanium dioxide (TiO2) feedstock mineral ilmenite are unlikely to rise significantly in the foreseeable future owing to the existence of large, ready-for-market stockpiles at many mines, industry commentators have told IM.

“There is a lot of ilmenite around, both easily mineable and ready-mined, so there is unlikely to be a major increase in prices in the medium term,” Abraham Rozendaal, professor of earth sciences at Stellenbosch University, South Africa, told IM.

“If prices go up by 5-10%, then producers will start to sell stockpiles. There is enough ilmenite ready to flood the market, so if this happens then this will bring the price back down again,” Rozendaal said.

Industry participants at Mining Indaba also confirmed to IM that there was a glut of ilmenite production being kept out of the market at present, but said that projected future demand for ilmenite should see these stockpiles come down before the end of the decade.

Professor Rozendaal said that although current estimates based on today’s ilmenite production levels coupled with projected future demand indicate the emergence of a 500,000 tonne supply gap by around 2020, the realisation of this deficit depends on how much additional production comes online in the future.

Phosphate

Phosphate prices appear to be steadying after falling throughout 2013, market reports indicate.

Russian phosphate-based fertiliser producer, PhosAgro, said in its full year 2013 earnings report in February that prices for phosphate-based fertilisers are beginning to normalise, as the effects of Urakali’s decision to exit Belarusian Potash Co. have subsided and demand returns ahead of planting seasons in key markets.

In late January, Canada’s PotashCorp. revealed that challenging fertiliser market conditions had affected the company’s financial performance in 2013.

Prices for the company’s phosphate-based fertilisers fell by over $100/tonne during the final quarter of last year to $455/tonne, down from $577/tonne in Q4 2012.

“Fertiliser products experience the largest decline, with average realised prices down by 28%, while prices for our more stable feed and industrial products were down 8%,” PotashCorp. said.

Prices for Moroccan phosphate (70-72% BPL, long term contract, FAS Casablanca) were at around $103/tonne in February, compared with values of $170/tonne the same time a year ago.

Potash

PotashCorp. also said that the average potash price fell to $282/tonne for the Q4 2013 and to $332/tonne for the year because of competitive pressures in all potash markets.

“Increased supply capability combined with relatively constrained demand resulted in continued price erosion through the last three months of 2013,” PotashCorp. said.

Prices are expected to stabilise above $300/tonne this year, however, following the agreement of benchmark potash supply contracts to China by both Russia’s Uralkali and Canada’s Canpotex.

Salt

Prices for chemical grade salt are expected to hold up in 2014 as demand from key importing regions and end markets looks set to be robust.

Decline in the quality of Chinese-mined salt is supporting Australian solar salt import volumes at a steady level, while import values have increased from $42/tonne in 2008 to around $50/tonne in 2013, marking an annual growth rate of 3.7% in prices.

In the regionalised de-icing salt market, recurring bouts of extreme cold weather in North America have pushed up prices for de-icing salt this year, with shortages leading to some suppliers quoting values of as high as $176/tonne, compared to the usual price of around $50/tonne.

Soda ash

Demand for soda ash continued to improve into the final quarter of last year but was met with tighter supply availability, helping to lift prices for the glass and soap raw material.

According to China Customs statistics released in November 2013, China exported soda ash totalling 120,000 tonnes during the preceding month, down 20.8% year-on-year (y-o-y) and 30.6% lower month-on-month (m-o-m).

The average export price rose to $194.60/tonne, up 2% m-o-m and marking the fourth consecutive monthly increase, although this figure was still down by 5.2% on last year’s average tonnage value.

Recovering demand for soda ash did not materialise until the second half of last year, when a domestic glass industry boom in China began to squeeze the market for both light and dense soda ash.

Global supply of soda ash (natural and synthetic) is forecast to rise by 3.4% per year from 54m tonnes in 2012 to 65m tonnes in 2018, according to Roskill Information Service analyst, Vincent Pedailles.

“Additional synthetic soda ash production based on salt raw materials is projected at around 6.8m tonnes in 2018, requiring approximately 11m tonnes salt,” Pedailles told IM.

Since September 2013, China’s soda ash producers have moved to increase production in response to the rise in demand, according to China Customs’ Export to China information service, with the overall industrial operating rate for soda ash output rising from 70% to 80% of capacity before the end of last year.

Given China’s domestic overcapacity for soda ash production, the utilisation of additional capacity could cause prices to retreat again this year, China Customs warned.

Elsewhere, in an echo of positive market predictions given in January last month by India’s Tata Chemicals, US headquartered FMC Corp. said that it was anticipating single-digit dollar per tonne increases in domestic and export soda ash prices, although its official forecast for the next 12 months only reflects contracts agreed to date.

“We remain optimistic that the soda ash pricing environment is improving, but our 2014 outlook only includes price increases that are currently specified in existing short- and long-term contracts. We continue to be supportive of ANSAC’s efforts to realise additional price gains in export markets,” said Pierre Brondeau, FMC’s CEO.

Sulphur

Prices for sulphur dipped slightly in January, market reports indicate, although industry observers still expect the value of the fertiliser feedstock to temporarily hold onto gains seen towards the end of last year.

Sources indicated that prices for sulphur (FOB Middle East) are currently around $165-180/tonne, down around $5/tonne from the start of the year, but still around 15% stronger, on average, than the $145-155/tonne levels seen in 2013.

Prices began to look up towards the end of 2013 after months of weakness, reportedly due to an uptick in demand from Chinese phosphate producers.

Because of its use in the phosphates industry, demand for sulphur is closely linked to phosphate rock consumption.

Diammonium phosphate (DAP) fertilisers saw reduced demand in 2013 because of unfavourable crop market conditions and competition from cheaper nutrient products, particularly in India.

Forecasts for global sulphur supply suggest a bumpy road ahead, with periods of rising demand followed by the arrival of production from major supply-side projects, leading to possible deficits followed by surpluses in the next year.

As a result, industry observers expect prices to remain volatile.

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

*Conversion made February 2014

If you wish to discuss any of the prices or grades listed in IM, please contact Laura Syrett, Prices Editor, at lsyrett@indmin.com.


ONE TO WATCH
Foundry grade chromite

Prices for foundry grade chromite (45-47% Cr2O3) are expected to fall in the coming months as demand from the casting industry softens. Weakness is also likely to affect refractory and chemical grade chromite, sources have told IM, affecting prices in South Africa and North America.

ONE TO WATCH
Ilmenite

Ilmenite demand looks set to recover this year, but industry observers have warned that producers must exercise strict supply discipline to avoid flooding the market and pulling down prices.