Pricing sentiments diverge on downstream outlooks in March

By Laura Syrett
Published: Friday, 21 March 2014

Barite prices steady but strong on oilfield demand while TiO2 trends downwards in Europe during Q1

March was a month of mixed emotions for the industrial minerals industry, as significant announcements in key downstream markets pushed sentiments in opposite directions.

Graphite and lithium producers were buoyed by the news that demand from a new Tesla battery factory could increase demand by 37% and 17%, respectively, (see pp31-33), while the potash industry was rocked by the news that India is to cut its potash subsidy by 18% from April.

Refractory mineral producers were also left wondering what the quality over quantity strategy being pursued by the likes of Vesuvius and Minerals Technologies will mean for consumption volumes of materials including bauxite and magnesia (see p11), while uncertainty over 2014 production levels continues to weigh on iodine.

Titanium dioxide (TiO2) producers were generally sanguine about an apparent stabilisation of price volatility in pigments and feedstocks, meanwhile, although early indications suggest values have slipped further in Q1 (see p23).

Antimony trioxide

Trioxide grade antimony prices rose at the beginning of March as a reduction of supply on the market helped to offset otherwise soft demand.

Chinese producers told IM that top prices for antimony ingot (99.65% min, FOB China) had tipped over the $10,000/tonne mark for the first time since November 2013 to reach a range of $9,800-10,100/tonne. FOB Rotterdam prices, meanwhile, were at $9,900-10,200/tonne.

Metal Bulletin (MB) reported that prices for trioxide grade material remained just below $10,000/tonne at the top end during the first week of March, quoting a range of $9,700-9,950/tonne. Standard grade II antimony was priced at $9,600-9850/tonne, according to MB’s prices, at the time of going to press.

The antimony market was boosted in February by the news that China’s Fanya Exchange is to launch an antimony contract at an unspecified future date as it moves to build its suite of traded minor metals.

The news was met by a warning from Belgium-based antimony trioxide producer, Campine, that the flame retardant industry, which consumes nearly 70% of global antimony production, could substitute the mineral if prices rise to $11,000/tonne.

Barite

Prices for drilling grade barite (barytes) remained stable at strong levels in the first two months of 2014 as robust demand from oilfields propped up values while production volumes fell in some regions last year, sources indicated to IM.

One source said that reduced quantities of drilling grade barite from China meant that prices “held up pretty well” last year, with this positivity expected to continue during the first half of 2014.

“China is always a problem [in terms of supply reliability],” the source said. “It depends on what kind of winter they have (...) and it seems that last year volumes were way down, so prices held up,” they added.

However, some prices dipped slightly in March, with values for Chinese barite (drilling grade, API underground lump, SG 4.20, FOB China) narrowing to $120-135/tonne from $120-140/tonne.

According to the latest US Geological Survey (USGS) Mineral Commodity Summary for barite, US producers of crude barite sold or used for grinding around 660,000 tonnes barite in 2013, at an estimated value of $78m with average prices of $115/tonne, compared with $112/tonne in 2012.

US sources said that much depends on prices decided through tenders for Indian barite later this year, but said that Chinese values are expected to remain flat.

Market indications suggest Indian barite prices were slightly weaker in March. Values for Indian material (API, ground, big bags, 1.5 tonnes, FOB Madras), slipped to $140-160/tonne from $160-170/tonne, according to IM sources.

Fluorspar

Fluorspar prices were stable during the first three weeks of March, according to analysis by IM Data, although the pricing service said it was moving to revise down its values for South African material.

“In acid-grade fluorspar [acidspar] markets, prices seem to have stabilised within our ranges,” said IM Data Analyst, Andy Miller, adding that there were presently few signs of an upturn in demand.

“We have not seen much movement in the metallurgical grade fluorspar [metspar] market throughout Q1, but this is something we are monitoring, with changes likely if steel production growth continues outside China,” he added.

Graphite

In graphite markets, there has so far been little evidence of the anticipated increase in demand for flake material.

“We expect consumers to start replenishing stocks early in Q2, so we are not anticipating much movement in prices until then,” IM Data’s Miller said.

IM Data has also forecast that the new $5bn ‘Gigafactory’ planned by electric vehicle (EV) maker, Tesla Motors, could

expand the graphite market by 37% by 2020, which may require as many as six new graphite mines to open in order to meet demand.

However, other industry observers have cautioned that the impact of Tesla’s plans may not boost the graphite market to such an extent as it is not yet clear whether the company will opt for natural flake material or synthetic graphite to manufacture its batteries.

Additionally, Asbury Graphite Mills’ CEO, Stephen Riddle, has pointed out that any new flake graphite mines will have to develop processing capabilities for spherical graphite in order to supply Tesla and that these will need to be cost competitive with Chinese producers if they are to be considered as economically viable alternatives.

Synthetic graphite

Price trends for synthetic graphite are separating into two distinct tiers as values for high purity powders climb on the back of increasing battery demand, while graphite electrode prices suffer as a result of the sluggish steel industry and increased competition.

Growing consumption of laptops, smart phones and EVs, all of which use batteries with anodes made mainly from synthetic graphite mixed with varying amounts of natural flake material, is bolstering prices for synthetic graphite powders (99.5% C), market participants told IM.

IM’s prices for this material stand at between $7-20/kg in Europe, while US prices are around $30-35/kg on a non-bulk, retail basis.

Sources told IM that they were seeing “stronger demand” for battery grade synthetic graphite, while manufacturers of graphite blocks and electrodes were struggling.

Germany’s SGL Carbon reported a loss for full-year (FY) 2013 of Û396.4m ($550.1m*) in March, compared to a profit of Û5.9m the previous year, citing price weakness in graphite electrodes and cyclical downturn in graphite specialties.

Analysts commenting on the results noted that profits remain capped by rising competition and the absence of price discipline among rival electrode manufacturers as they attempt to capture market share in the muted steel market.

IM’s prices for synthetic graphite on a CIF Asia basis stand at $950-1,450 for 97-98% C material and at 1,000-1,500/tonne for 98-99% C purities.

Iodine

Iodine prices fell further in March, market participants told IM.

Some Europe-based sources which import and resell both crude iodine and iodine chemicals said that they were selling iodine (99.5% min, drums) for prices of between $43-48/kg. Others in the region said that these prices were “optimistic” and that prices of $39/kg were being offered to attract buyers.

South American sources reported that values had slipped to $42-47/kg for both spot and contract orders.

According to the USGS’ latest mineral commodity summary for iodine, the average price of iodine imported into the US in 2013 was $43/kg on a CIF basis.

Chilean miner Sociedad Quimica y Minera (SQM) predicted in early March iodine demand would grow by 3-4% in 2014, a figure also predicted by the USGS, which anticipated increasing consumption from liquid crystal display (LCD) and x-ray contrast media manufacturers.

Lower value applications such as biocides, which reduced their iodine usage when prices climbed to historically high levels of over $90/kg, are beginning to resume their consumption in response to softer prices.

Lithium

SQM also said in its FY 2013 results that it had seen a 12% average increase in lithium prices last year, with overall demand growth throughout 2013 reaching 4%.

The company predicted strong growth in the industry in 2014 - a forecast which was given added weight by the news that Tesla’s new North American battery facility could consume up to 17% of current global lithium output.

IM’s prices for lithium carbonate (large contracts, del US) currently stand at $2.90-3.10/lb ($6.40-6.80/kg). Lithium hydroxide (56.5-57.5% LiOH, large contracts, packed in drums or bags, del Europe or US) prices are in the $6.40-6.75/kg range, meanwhile.

Potash

India is to cut its potash subsidies by nearly one fifth from April, demolishing hopes for a resurgence in domestic demand and global prices for the fertiliser mineral.

India’s fertiliser ministry set the subsidy at Indian rupee (INR) 9,300 ($150)/tonne for the next financial year down from INR 11,300 ($182)/tonne for the twelve months ending 31 March 2012.

The withdrawal of support will make the cost of potash more expensive for domestic potash consumers in India and is therefore likely to scupper consumption growth.

A report released by financial forecasters, TD Economics, predicted that prices for potash are unlikely move above $320/tonne for at least the next two years.

“We expect international potash prices will hover close to the current level of $305-320/tonne, on a CFR basis, over the next two years,” the report said.

Although TD Economics expects prices to remain range bound, it said that this will mask a “bumpy and volatile” market profile over the coming 24 months.

Rare earths

Prices of some rare earths appe-ared to be firming in March, reversing the weakening trend seen throughout the first two months of 2014.

Praseodymium oxide reportedly saw notable gains of between 5-10% during the first two weeks of the month as supplies of the element have recently been tighter than for other rare earths.

This is because producers have not been separating praseodymium from praseodymium-neodymium (Pr-Nd) oxide, which is used in magnets for electric vehicle motors, as this mixed oxide has seen an uptick in demand.

China-based sources have suggested that some rare earths producers have raised their prices in anticipation of an imminent round of buying by the country’s State Reserve Bureau, although there are rumours of discounts being given to some buyers, which previously pushed down FOB prices seen by IM to below Chinese domestic values.

Even the lowest value light rare earths, cerium and lanthanum, appear to be stabilising, although it is unclear how long this will last.

Titanium dioxide

TiO2 prices trended downwards in Western European markets during the first quarter of 2014, according to a report by EuropŠischer Wirtschaftsdienst GmbH (EUWID) (see p23).

The report said that demand for TiO2 has picked up after a slow start in January, with the mild winter in Western Europe meaning that paint and varnish producers experienced good demand for building coatings and paints from the building and construction industry.

Paints manufacturer AkzoNobel NV said in March that it experienced a stabilisation of TiO2 prices during the final months of 2013, helping the company to control input costs.

Speaking during a corporate presentation in London, Ruud Joosten, international marketing manager for decorative paints at AkzoNobel, indicated that the Dutch chemicals producer had seen prices for TiO2 of approximately Û2,200-2,300 ($3,050-3,200)/tonne in Q4 2013.

These values are roughly equivalent to levels seen in Q1 2011 before prices peaked during the second half of that year and remained high into the early part of 2012.

Joosten also said that AkzoNobel had felt the impact of TiO2 price volatility in recent years but was benefitting from a steadying of the market as it pursues a 7.5% return on sales and a 12% return on investment by 2015.

Kronos Worldwide Inc. and Kenmare Resources Ltd also released results for the full year 2013 in March, which showed the impact of a weak pricing environment for both TiO2 and feedstocks.

*Conversions made March 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
Indian barite
Prices for Indian drilling grade barite appeared to weaken slightly in March and future price movements will hinge on tenders from India’s major producers later this year.

ONE TO WATCH
TiO2
The top TiO2 producers, with the exception of Kronos, have said that they expect prices to stabilise in 2014, but market analysis so far this year suggests that values could sink further before reaching a floor.

ONE TO WATCH
Praseodymium
A relative shortage of praseodymium oxide in March saw prices begin to reverse a downward trend for the light rare earth. Market indications suggest that other rare earths were also beginning to regain value, although market observers are hesitant about calling a recovery after upticks in late 2013 proved to be short lived.