The month of August saw the release
of more first half earnings statements from mineral and
chemical companies, many of which used the opportunity to offer
price guidance for the remainder of the year.
Agrimineral producers continued
their upbeat assessment of the market, although a report
released by banking group Goldman Sachs in late July warned
that the flush of stockpiling seen during the six months to the
end of June is likely to tail off in the coming months.
In the chemicals industry, soda ash
prices have been strengthening outside China in the wake of
capacity shutdowns across the world, leading US producers in
particular to anticipate widening margins in the next two
quarters (see pp14-15). Caustic soda prices,
meanwhile, are suffering from flat consumption and excess
production.
The mineral sands industry saw
local pricing pressure on Indian ilmenite as unforgiving trade
duties send Chinese business to Africa, while zircon buyers
have warned that any increase in selling prices could
jeopardise downstream markets.
Agriminerals - retaining
optimism
Phosphate
Benchmark FOB Tampa, Florida, spot
prices for fertiliser grade phosphate have improved
significantly from 2013 levels, despite lower crop prices in
the first half of 2014 and the start of the third quarter.
Russian phosphate producer PhosAgro
said in its H1 2014 earnings update in late July that prices
for diammonium phosphate (DAP) on an FOB Florida basis had
recovered by around 18% this year, from around $407/tonne at
the beginning of 2014 to $480/tonne by the end of June.
“Looking forward to the
remainder of 2014, we believe that the market remains strong
and we are seeing prices for DAP increasing to and above
$500/tonne in all markets, with FOB Tampa at $510/tonne for the
last two weeks, despite declining prices for the soft
commodities basket,” PhosAgro CEO Andrey Guryev said.
Guryev also noted that ammonia is
currently priced around $500/tonne while sulphur values
continue to increase from a base of above $150/tonne for most
producers.
Rival producer EuroChem said in
mid-August that it had seen a slowdown in the previously
observed rise in nitrogen and phosphate-based product prices in
Q2.
Prices (FOB Baltic Sea) for
monoammonium phosphate (MAP) for the quarter fell 7% to
$456/tonne, while DAP prices average $457/tonne, a decrease of
8% year-on-year (y-o-y).
Potash
Potash miners are unlikely to
accept lower prices for the fertiliser mineral in the second
half of this year, sources have told IM.
The comments were prompted by a
report from Goldman Sachs which said that the boost to potash
demand and prices seen in the first two quarters of 2014 was
likely to be temporary, as buyers took advantage of low prices
to build up stockpiles.
Prices for potash had begun to
recover from the $300/tonne mark seen at the beginning of this
year, with major producers including Uralkali, PotashCorp and
Vale all reporting price improvement in Q2 2014.
Brazil-based Vale, which released
its second quarter results in early August, indicated that
average selling prices for potash had increased by around 7% to
$358.49/tonne, up from $336.21/tonne in Q1 this year.
EuroChem said contract prices (FOB
Baltic Sea) for muriate of potash (MOP) averaged around
$292/tonne for the second quarter of this year, meanwhile,
which was a 21% decline y-o-y.
Spot prices (FOB Baltic Sea) were
also significantly below the 2013 price of $402/tonne at
$283/tonne.
Market
commentary
Sources told IM
that while Goldman Sachs’ view that fertiliser mineral
demand would ebb in the second half of the year accorded with
wider analysis of the potash market in H1 2014, miners are
expected to stick to their guns and ensure flat pricing rather
than allow the market to retreat in the coming quarters.
Russian potash miner Uralkali has
even hinted that it may raise its benchmark Chinese potash
price by 10% next year.
Renewed confidence in the medium to
long-term prospects for fertiliser minerals and agricultural
commodities are among the chief reasons behind the recent price
recovery in both phosphate and potash, as well as robust
demand, sources said.
Market participants added that the
increasing use of agriminerals in higher value speciality
fertilisers are also contributing slightly to stronger
prices.
Demand is also expected to remain
robust in North America, according to recently published
outlooks from Mosaic and PotashCorp.
The outlook in India, the
world’s second largest potash market, is less rosy,
however, with forecasts predicting that rainfall over the
country as a whole for the 2014 southwest monsoon season (June
to September) is likely to be below normal, at 93% of the long
period average (LPA).
This is likely to mean lower
planting rates for the agricultural sector and therefore less
demand for fertilisers for the next growing season.
Chemicals - China causing
concern
Iodine
Prices for iodine have been broadly
stable over the summer, sources have indicated to
IM, raising hopes that the market slide may
have come to a halt.
The settling could just be a hiatus
in the softening of prices, however, as it remains unclear
whether the market has bottomed, given that some capacity
increases in Chile reportedly remain on track and Chinese
demand does not appear to have increased.
At the beginning of the year,
market participants said that they were anticipating a price
floor of between $40/kg and $45/kg to be reached in 2014, with
some warning that values below this range would be
unsustainable for many producers.
Sources told IM in
August that prices of $42/kg are still being achieved, but this
is believed to be for insignificant volumes of iodine for fine
chemical and speciality applications.
The majority of business is thought
to be being concluded at prices between $36/kg and $41/kg - a
range broadly flat with the end of June.
Soda ash
Soda ash prices are under pressure
in China as the industry struggles with weak downstream demand
from glass makers.
Glass consumption is suffering as a
result of stuttering growth in construction, automotive and
manufacturing in the world’s second largest economy,
prompting soda ash producers to look to export margins to
compensate for poorly performing domestic operations.
FOB China prices for soda ash are
reported to be around $220-230/tonne at present.
Elsewhere, Indian prices are
reported to be up slightly over levels seen earlier this year,
after the closure of Tata Chemicals’ Magadi soda ash plant
in Kenya reduced supplies to the country.
Ex-works India material is reported
to be around $300-320/tonne.
North American prices have
softened, meanwhile, as US producers have been able to take
advantage of low energy costs to maintain margins at
competitive prices.
US-based FMC Corp. said that
domestic prices had risen slightly in the second quarter of
2014 but were broadly steady.
“We had pricing stability in
the low single-digit percent [domestically] in North America
[and] stability in Latin America and good pricing traction,
with double-digit percent increase in Asia,” CEO Pierre
Brondeau said.
Ex-works US prices are between
$160-200/s.ton, while FOB Wyoming values are averaging slightly
above the $200/tonne mark.
In the UK, meanwhile, some market
reports suggested that prices in the UK rose by around
$25/tonne in August compared with July.
Caustic soda
Caustic soda (NaOH) prices have
remained weak so far in 2014, having started their decline in
January after a year of relative stability in 2013.
The market has been on a downward
trend throughout the year, with softness in the spot market in
the first quarter of the year feeding through into contract
prices by Q2.
Prices in Europe have been hampered
by increased production when demand has remained steady at
moderate levels.
In the US, declining consumption of
chlorine, which is produced as a co-product from the synthesis
of caustic soda, is also reported to be holding back the
market.
Export prices for caustic soda
(bulk) are priced between $320-350/s.ton FOB USA and around
$255-320/tonne ($340-427*/tonne) FOB Rotterdam.
Prices within Europe are reported
to be between $300-370/tonne ($400-494/tonne) for contract
orders, depending on volume.
Market
commentary
Iodine demand is currently reported
to be stable but flat, meaning that the activation of further
production capacity this year could push prices lower.
Earlier in 2014, it was thought
that a planned increase in production by Chilean miner Cosayach
would be held back by delays to its seawater pipeline project,
but the company has since confirmed to IM that
the pipeline to supply its iodine operations in Tarapaca,
northern Chile, is on course for completion by the end of this
year.
This will allow the company to
increase production from 4,000 tpa to 6,000 tpa iodine in the
course of 2015, it said.
Rival producer Sociedad Quimica y
Minera (SQM) is also vying for market share, meanwhile, and
aggressive marketing strategies within the country may cause
prices to weaken further in the coming months.
In the soda ash market, meanwhile,
FMC said that the reason for firming prices is linked to
dwindling production capacity: “Because there is no major
capital spending [on new capacity] forecasted in Asia (...) we
start to see the demand and supply balance getting
better,” CEO Brondeau said
“There [have] been, in the
last year or so, about 1.5m tonnes of shutdowns that actually
have occurred across the globe. So net-net, supply has actually
been decreasing [versus] capacity that has currently been on
line,” FMC’s president, Edward Flynn, pointed
out.
Belgium-headquartered Solvay closed
its production facility in Povoa, Portugal, earlier this year
but is expanding output by 12%, or 150,000 tonnes, at its Green
River factory in Wyoming, US.
This expansion is not expected to
counter the effect of recent plant closures by Tata Chemicals
in the UK and Kenya as well as Penrice Soda Holdings in
Australia, however. Delays to new projects in Turkey are also
adding to the risk of a shortfall of soda ash on the European
market.
Growing demand for soda ash over
the next decade is expected to be driven by consumption of both
flat and container glass in emerging economies, with chemicals
consultancy IHS predicting an annual growth rate of 3.1% to
2024.
Prospects are gloomier for caustic
soda, however. An initiative by the European industry
association, Eurochlor, prohibiting plants without modern
membrane technology from operating beyond 11 December 2017, is
expected to shortly be approved and could potentially affect
around a quarter of existing caustic soda plant capacity in
Europe.
Given that caustic soda margins are
under pressure, it is likely that some producers will mothball
plants rather than invest in upgrades.
Mineral sands - stiff
competition
Ilmenite
The Mining Engineers’
Association of India (MEAI) has asked the Indian government to
withdraw a 10% export duty imposed on ilmenite ore and 5%
export duty on upgraded ilmenite, local news service
Business Standard reported in August.
According to the MEAI, China, which
is the main export market for Indian ilmenite, has already
stopped buying the mineral from India as imports from Africa
are cheaper and available in large quantities.
MEAI leaders said the situation was
also affecting prices. “The price of Indian ilmenite was
around $200/tonne some time back and it has come down to around
$110/tonne now,” said Arjeth Bagchhi, president of
MEAI.
Zircon
Prices for zircon are reported to
be stable after softening throughout the first half of this
year.
During late July and August, a
steady stream of mineral sands producers, including Rio Tinto,
Tronox and Kronos Worldwide, reported lower y-o-y pricing for
zircon in H1 2014, although Tronox did report a 1% sequential
increase in prices in the second quarter.
Chinese zircon buying activity is
typically quiet in the summer months, with reports indicating
that the stasis in the market has left prices flat in July and
the beginning of August.
Benchmark prices for zircon on a
CIF China basis were set for Q3 at around $1,160/tonne,
although sources told IM that deals were being
concluded below this level.
Prices will be reviewed again
before that start of the fourth quarter of this year.
Meanwhile, Goldman Sachs has
predicted that the market will improve on rising demand towards
2015.
Market
commentary
The loss of Chinese custom is a
significant blow for the Indian ilmenite industry, as the
quality of the material is lower than that mined from other
countries and only finds significant demand in China.
India contributed around 5%, or
340,000 tonnes, of world ilmenite production in 2013, USGS
estimates show. Bagcchi pointed out that domestic reserves are
under exploited, with India’s production to reserve ratio
of ilmenite standing at just 0.001.
According to MEAI, India is losing
market share to Africa, as it struggles to deal with regulatory
changes in the mining industry, export duties, poor
infrastructure, inconsistent power supply and expensive waste
disposal charges that make upgrading Indian ilmenite
financially unviable.
For zircon, sources said that
consumers of mineral sand continue to favour alternatives,
particularly in the ceramics industry, because substitute
materials are cheaper and buyers are concerned about future
large hikes in zircon prices.
Europe-based buyers have told
IM that today’s prices are just about
sustainable with the current volumes of business available, but
further increases will be seen as detrimental to the downstream
businesses.
Sources also hinted that mineral
sand producers may attempt to push up zircon prices in an
effort to compensate for the current weakness in
TiO2 feedstocks.
Elsewhere, prices of Vietnamese
mineral sands are reported to be under pressure from
overcapacity and flat demand from China.
Full information on all
IM’s prices can be found on the
IM Prices Database.
*Conversion made August
2014