A swath of first quarter exploration and production results
released in May for industrial mineral companies revealed
that both demand and prices are broadly stable across
refractory materials, while consumption is rising for
minerals used in pigments, fertilisers and drilling fluids.
Excess capacity in some markets,
including rutile and refractory grade graphite, is keeping
prices down at low levels, although steady demand trends mean
that values for these minerals are unlikely to fall
significantly this year.
From a broader financial
perspective, the end of the mining industry’s long
austerity chapter could finally be in view, with a number of
miners signalling plans to increase spending on R&D, having
adjusted to weaker pricing environments.
Rio Tinto, the world’s second
largest miner, intimated in its AGM in May that it may be in a
position to pursue growth initiatives in place of capex
restraint by 2015, after more than two years of aggressive
cost-cutting.
CEO, Sam Walsh, said that
forthcoming investment decisions will not be based on current
mineral prices, but on “the bigger, longer picture”,
which Walsh expects to improve as net mineral consumption
increases and a strengthening global economy frees up more
funding for mining projects.
In the securities markets, latest
stock exchange figures suggest that equity funding is beginning
to trickle back into mining stocks, although funding for
explorers remains tight and the financial environment is not
yet strong enough to support a recovery in mining IPOs (see
p12).
Bauxite
Prices for refractory grade bauxite
have reportedly been stable since March after rising by around
$30/tonne in the first quarter of this year, as orders and
inventory levels remain steady.
Chinese refractory bauxite (Shanxi,
FOB Xingang, round kiln, 87% Al2O3, lumps
0-25mm) was reported to be selling at $375-430/tonne in May.
Prices of $430-440/tonne were quoted on an FOB Tianjin basis,
meanwhile.
A recent report by
iAbrasive said that concerns over a lack of
metallurgical grade bauxite shipments from Indonesia this year
had helped to push up values for refractory grade material,
which may explain the slight price rises seen in Q1.
Market reports indicate that
domestic Chinese demand for refractory bauxite has remained
unchanged since March, while India, one of the biggest
consumers of refractory raw materials, also saw flat imports of
around 1m tonnes of round kiln, 86% Al2O3
material during the final month of Q1.
Although buyer inventories are
reported to be low and demand steady, ready availability of
material means that consumers are not rushing to restock.
Bromine
Three of the world’s major
bromine producers, US-based Albemarle Corp. and Chemtura Corp.
together with China’s Gulf Resources Inc., have all
offered similar predictions that bromine prices are likely to
remain weak but steady for the rest of this year.
Values for the chemical have been
stable since the start of 2014 at around $1.6-1.75/lb
($3.50-3.85/kg) and $3,000-3,180/tonne (bulk).
Speaking during the company’s
Q1 2014 post earnings conference call, Albemarle management
said that indications from the market during the three months
to the 31 March were that prices were unlikely to change.
“We’ll continue to be
watching and then observing what’s going on in the market
for demand and seeing where things are going, but right now we
feel we can overall maintain pricing about where it is for the
year,” CEO Luke Kissam said.
Matthew Juneau, senior vice
president at Albemarle, added that the company’s recent
price increases for its “tetrabrome” products had
“not totally stuck” since they were implemented last
year.
Rival Chemtura was marginally more
positive in its consumption forecast but echoed Albemarle in
offering a stable outlook for prices.
CEO Craig Rogerson said that
Chemtura’s 2013/14 price increases for its tetrabrome
products were “sticking to a reasonable extent” and
noted that increasing uptake of more expensive brominated
chemicals by the flame retardant industry was helping to offset
falling consumption of traditional bromine-based HBCD
products.
Meanwhile, Asian producer Gulf
Resources said that its weak but steady price expectations
offered the company an opportunity to grow its bromine business
by acquiring further assets.
Fluorspar
Fluorspar prices remained stable
during the latter part of April before South African acid-grade
fluorspar (acidspar) prices fell again in mid-May.
According to IM
Data, the price of acidspar (97% CaF2, dry
filtercake, FOB, Durban, South Africa) is now $310-340/tonne,
down from the $340-370 range seen since the middle of March
this year.
“This adjustment is a
reflection of the ongoing contraction in the size of acidspar
demand,” IM Data analyst, Andy Miller,
said.
“South African prices have
fallen to compete with low-cost Chinese supplies, however we
are not expecting major decreases across other regions for the
time being,” he added.
Graphite
Price increases for Chinese
graphite are likely to soon affect values for high purity
material produced for specialist applications, such as
batteries, IM has learned.
Sources familiar with the
production situation in Shandong province, which is the
principal source of ‘high end’ processed graphite
products, including spherical and expandable graphite, said
that plant closures in and around the city of Pingdu has
reduced supplies of these speciality materials.
In the neighbouring city of Laixi,
which is also an important producer of high value graphite
products, there have so far been no reported plant closures,
although factories in the area are expected to face enforcement
of environmental regulations, which could affect production, in
the near future.
“This situation has had an
influence on the prices of chemically purified graphite and
expanded graphite, which are the main products coming from
plants in that area,” the source said.
Prices for high purity graphite
(-100 mesh, 99.5% C) have reportedly risen by 5-10% as a result
of the cut in supply, with the same situation seen for prices
of expandable graphite and spherical material used in
lithium-ion batteries.
“A good price for this type of
material [-100 mesh, 99.5% C] would normally be around
$1,200/tonne FOB China, but these have now increased to more
than $1,400/tonne - around $1,420-1,450/tonne,” a source
said.
One trader told IM
that they expect to start introducing price increases for
spherical and expandable graphite to customers in the coming
weeks.
Prices for refractory and foundry
grade material (-100 mesh and +80 mesh grades, 80-96% C) are
not expected to be affected, however.
Kaolin
Prices for paper coating grade
kaolin in the US have fallen as consumption of the clay by
paper markets remained flat in 2013.
Values for No.1 paper coating grade
kaolin (ex-Georgia plant) have dropped to $130-$180/s.ton from
$167-$217/s.ton.
No.2 paper coating grade
(ex-Georgia plant) material is priced at $112-175/s.ton, having
risen marginally from $107-167/s.ton late last year as a result
of higher manufacturing costs.
Market sources suggested to
IM that the decline was due to kaolin
producers lowering their prices as a result of increased
competition in the paper coatings and fillers market.
Prices for Brazilian paper coating
grades remain slightly higher, meanwhile, at $195-250/tonne (5%
moisture, bulk, C&F Europe) and $230-280/tonne (slurry
form, bulk, C&F Europe).
Lithium
Sources in the lithium industry
have reported a resurgence of market activity following the
announcement in February that electric vehicle maker Tesla
Motors plans to build a new lithium-ion (Li-ion) battery
facility in North America.
Orders for lithium carbonate
equivalent (LCE), which is used to make Li-ion batteries and is
currently priced at around $6.20-6.80/kg ($2.80-3.10/lb, del.
US), have picked up, sources told IM, although
prices have not yet surpassed 2013 levels.
Lithium hydroxide (LiOH), for which
the main market is industrial greases but which is also finding
acceptance in the battery industry, is priced at $6-6.60/kg
(del. Europe or US) and is also seeing higher demand.
Prices for LiOH slipped towards the
end of last year and lithium carbonate remained flat after a
lacklustre 12 months for lithium, but market participants said
they expect prices to match last year’s averages with
increases possible later in 2014.
US-based FMC Corp. recently raised
its prices for lithium hydroxide by 10% globally. “We are
currently experiencing very high operating rates, as demand for
high quality lithium hydroxide has grown,” the company
told IM.
“Prices for lithium carbonate
and lithium chloride are relatively flat versus last year,
[while] prices for butyllithium are up modestly,” FMC
said.
Phosphate
Phosphate producers continued to
report pressure on profit margins in May, despite higher sales,
as a result of weaker prices (see pp18-19).
Agrium Inc. saw its first quarter
2014 profits plunge 92% on lower prices combined with the
impact of a record cold winter across North America in
2013/14.
Realised phosphate sales prices for
the quarter averaged $544/tonne, down from $698/tonne in Q1
2013 reflecting weak global market conditions at the end of
2013 and the start of 2014, Agrium said.
Rival producer Mosaic, meanwhile,
reported an average diammonium phosphate (DAP) selling price of
$414/tonne in Q1 2014 compared with $491/tonne the previous
year.
Potash
As with phosphate, potash price
pressure was a key factor in the decline in earnings for
fertiliser mineral producers.
Germany-based K+S Group reported a
7% fall in revenue to to €1.19bn ($1.62bn*) for the first
quarter of 2014, following the turmoil in the global potash
market in the second half of 2013
“The principal cause of the
revenue decrease is a significantly lower price level on the
global market compared to a year ago, as well as slightly lower
sales volumes than in the same quarter a year ago,” the
company said.
Agrium reported that muriate of
potash (MOP) prices fell to $267/tonne down from $376/tonne
year-on-year (y-o-y).
Rare earths
Belgian vertically integrated
chemicals producer Solvay this week posted net income for Q1
2014 of Û121m ($167.8m), up from Û101m for the
previous year’s Q1, despite feeling the effects of weak
pricing in its rare earths business.
The group’s Advanced Materials
segment, which encompasses rare earths and silica, recorded a
3% increase in sales at Û658m, although revenue from rare
earths declined by 14% y-o-y in Q1 2014 to Û71m.
US-based rare earths miner Molycorp
Inc. also reported falling prices when it recorded a wider
first quarter loss, y-o-y, in May.
Molycorp sold 3,518 tonnes rare
earth products at an average sales price of $33.69/kg in Q1
2014, compared to sales of 3,274 tonnes at an average price of
$44.71/kg in the first quarter of last year.
Meanwhile, Chinese rare earths
companies are reported to be raising offer prices for
praseodymium-neodymium (Pr-Nd) oxide as speculation continues
to circulate over possible plans for a national stockpile of
the minerals.
Neodymium prices are currently
around $65-70/kg while praseodymium values are $170-185/kg,
according to the IM Prices Database.
Reports of government backed
hoarding of rare earths recur frequently in China and tend to
lift the market temporarily when buying activity is otherwise
weak.
Rutile
Rutile market participants
interviewed by IM in May described the
industry in terms ranging from “tough” to
“terrible”, even though sales for the mineral sand
have been at a healthy level so far this year.
Prices for rutile have widely
dropped below $1,000/tonne as cheaper Chinese material, which
currently sells for around $850-950/tonne (concentrate, min 95%
TiO2, bulk, CIF China), has eroded the value of more
expensive, long-standing contracts from Australia.
One source told IM
that the rutile business was “tough”. “China is
very much a discount market for rutile at the moment (...) You
still see prices of around $1,100 tonne, but these are
generally legacy contracts for Australian rutile sold to Korea
and are not really reflective of the market,” the source
added.
Another source described the
present state of the rutile market as “terrible”,
even though demand from end markets such as titanium dioxide
(TiO2) pigment has recovered slightly since
2013.
Some industry participants have
warned that the unfolding crisis in Ukraine following
Russia’s annexation of Crimea in March could disrupt
supplies of rutile to the rest of the world.
Ukraine was the fourth biggest
producer of rutile in 2013 at 60,000 tonnes, according to the
US Geological Survey, behind the US (450,000 tonnes), Sierra
Leone (120,000 tonnes) and Mozambique (90,000 tonnes).
TiO2
TiO2 prices slipped by
around $50/tonne, on average, in April as recovering demand and
sales volumes for the pigment feedstock failed to drive up
values.
Prices were down in most major
consuming regions, with CFR Asia values sliding into the
$3,150-3230/tonne range, while CIF Northern Europe were down to
Û2,600-2,640/tonne and CIF US prices were at
$3,370-3,395/tonne. Prices were not seen to recover these
losses in May.
Paints and coatings producer,
DuPont, said in its Q1 results that its operating earnings fell
partly due to lower TiO2 selling prices, while
TiO2 miner Kronos Worldwide reported a 5% drop in
average prices year-on-year.
Quarter-on-quarter, Kronos said
that selling prices were 4% lower than at the end of 2013,
primarily in export markets as a result of “competitive
pressures”.
Market participants have suggested
that an underlying recovery in TiO2 demand will
translate into higher prices in later quarters, although mine
production will need to be managed to keep a lid on producer
inventories, which could in turn hamper price growth.
*Conversions made May 2014.
ONE TO WATCH
Spherical graphite
Sources told IM in mid-May that they expected
to introduce price increases of 5-10% for battery grade
graphite products for customers without long-term contracts
after processing plant closures in Shandong, China, cut
supply.
ONE TO WATCH
Lithium carbonate
Lithium producers have reported an increase in demand for
lithium this year and expect prices to surpass 2013 averages in
the coming quarters.