Industrial mineral markets were
slow to get moving in September, with anticipated upticks in
buying activity in a number of sectors, including graphite,
lithium and iodine, failing to materialise, causing prices to
flatten or fall back.
Persistent concerns about the
health of the Chinese economy, and in particular its
construction industry, also dealt a blow to titanium dioxide
(TiO2) feedstock prices (see pp31-35 and
p55) and supressed other markets, including refractory
minerals.
Agriminerals received a vote of
support, meanwhile, as analysis by some banks and major
producers predicted that demand and prices will remain
relatively healthy in the near term.
Agriminerals - positivity
for potash
Potash
Logistical bottlenecks were
reported to be pushing up local prices for potash in the US
towards the end of the summer, a trend that was at odds with
global pricing trends for fertiliser minerals, which had been
flat to weak in September.
Buyers in a number of US states
said that potash was not available for less than $375/tonne and
anecdotal evidence suggested that the majority of deals were
being concluded above $420/tonne.
Freight problems were being blamed
as a major contributing factor to the higher costs, with
benchmark export prices remaining subdued.
Despite the broader weakness in the
market, French investment bank Societe Generale (SocGen) has
forecast that potash prices will rise until 2017, with
Brazilian prices increasing to $400/tonne over the next three
years from around $347/tonne at present.
Chinese potash prices, meanwhile,
are expected to jump to $360/tonne in 2017 from $305/tonne in
2014, and European prices to $430/tonne from $381/tonne over
the same time frame.
Market
commentary
In the North American potash
market, grain dealers have reportedly tied up many of the
barges used to transport the mineral to terminals supplying
crop growers in Midwest and central US states.
Rail car availability is also said
to be scarce, with most cars bunched together in western US in
the first half of September.
Inventories at terminals were
reported to be low during the month, with many buyers taking
delivery of material immediately on purchase.
Some growers indicated that they
would hold back from buying more potash-based fertilisers at
current prices, preferring to rely on cheaper lime and gypsum
nutrients while they wait to see how prices change in the
coming months.
Others said they may reduce their
application of potash until the market settles.
Despite this apparent withdrawal of
buyers from the North American market, leading potash miner
Uralkali said at the end of August that demand had been
stronger in the continent than in other regions during Q2 2014,
and that it expected consumption to remain robust until at
least autumn.
This perspective was reinforced by
SocGen’s analysis that the potash industry is likely to
remain bullish until 2017, due to high barriers to entry for
new miners and the ability of existing producers to control
supply.
“We reiterate our more bullish
than consensus outlook for the potash sector. We believe
consensus is too bearish due to expected supply additions in
the medium to longer term,” SocGen said.
High profits in 2007-2008 and
2010-2011 led to many potash expansion projects, but few are
likely to start producing significant volumes for another three
years, which should keep potash prices buoyant.
Chemicals - more bad news
for iodine
Iodine
Iodine prices fell further in
September, industry sources reported to
IM.
High range prices slipped to
$40/tonne early in the month, although these values were said
to be only nominal, with deals in spot and contract markets
being concluded in the high $30s range, at most.
Europe-based sources said that they
were sitting on material purchased at $39-40/kg that they were
struggling to shift.
Prices at bottom end of the range
now stand at $35/tonne and could fall further before the end of
the year, sources said.
IM’s iodine
prices (crystal, 99.5% min, drums, spot and contract) now stand
at $35-40/tonne.
Market
commentary
Some market sources pointed to
excess iodine supply chasing too few buyers as a reason for the
latest fall in prices, while others have blamed large companies
vying for market share allegedly dropping their offers below
“sustainable” market levels.
The decline in prices appeared to
have come to a halt in August, fuelling faint hopes that the
market had bottomed and that Chinese buying activity would pick
up in the second half of the year.
Energy minerals - peaked
too soon?
Graphite
Graphite prices were broadly stable
in December, according to information gathered by IM
Data.
The pricing service said that low
consumption rates throughout the year have dragged many prices
to four-year lows and that despite reduced Chinese production
over H1 2014, excess capacities continue to weigh heavily on
the market.
The price of lower-value Chinese
flake graphite grades fell under the pressure of this excess in
August, with average prices down 8% for 90% C, -100 mesh grades
(FOB), IM Data reported.
A similar trend was observed for
+80 mesh grades, notwithstanding tighter supply conditions in
this area of the market.
Lithium
Prices for lithium compounds fell
slightly towards the middle of this year, even as producers
continued to report strong market demand.
The world’s largest lithium
producer, Sociedad Quimica y Minera (SQM) said in its second
quarter earnings in August that demand in the lithium market
had been “very strong during the first part of 2014, and
it is expected to increase approximately 10% in 2014 compared
to 2013”, driven mainly by batteries.
It added that prices in its lithium
business had fallen by 8% in Q2 compared with Q1 and that the
company expects prices will remain flat for the remainder of
this year.
IM’s prices
for lithium carbonate (large contracts, del. Continental US)
have been revised to $2.7-3.1/lb ($5.95-6.82/kg) from
$2.8-3.1/lb ($6.16-6.82/kg).
Vanadium
pentoxide
Prices for vanadium pentoxide
(V2O5) have been on a downward trend
since the beginning of 2014, market data shows.
In Europe, having started the year
at prices ranging from $5.55-6.10/lb ($12.20-13.40/kg), values
for V2O5 (min 98%, Europe main port)
quoted by Metal Bulletin (MB) are now around
$5.10-5.40/lb ($11.20-11.90/kg).
Chinese export prices stood at
$5-5.10/lb ($11-11.20/kg) at the beginning of September,
according to other sources, while prices in Japan were reported
as being $5.05-5.15/lb ($11.10-11.30/kg).
Prices were said to have fallen by
around 10% in these regions in the first half of September.
Market
commentary
Many sources were reluctant to
speculate on reasons for the decline in graphite or lithium
prices, although some market observers told IM
that the price increases for lithium reported earlier in the
year were the result of premature responses to the news that
Tesla Motors plans to build a lithium-ion (Li-ion) battery
Gigafactory in the US.
Analysts from Goldman Sachs have
predicted that the Tesla facility could consume 15,000-25,000
tpa lithium carbonate (equivalent to 17% of current global
output), while IM Data calculated that an
additional 93,000 tonnes flake graphite could be needed (112%
more than is consumed globally at present), by the time the
plant reaches full capacity in 2020.
The Gigafactory is not expected to
commence operations until 2017, however, which is a long way
off for existing lithium and graphite producers and gives
junior companies time to enter the supply market.
SQM said that very little new
lithium supply has come online so far this year, which helped
prop up demand for its lithium products in H1.
However, sources have warned that
if several explorers pile into production ahead of 2017, the
additional competition could pull prices down.
In the vanadium market, the price
of V2O5, which historically broadly
tracked that of ferro-vanadium, has become disconnected from
values for alloy material in Europe.
Almost all vanadium produced
worldwide is consumed by the steel and titanium alloy
industries, with many ferro-alloy producers buying
V2O5 for conversion into alloy material,
although the cost of this process and the price differential
between the two materials is becoming prohibitive.
The metal has also sparked interest
as a potential material for next generation vanadium redox
batteries, although this only accounts for around 1% of the
total vanadium market and few producers expect this industry to
have any meaningful influences on prices in the medium
term.
Mineral sands - grim
outlook for feedstocks
Ilmenite
Prices in the ilmenite market show
no sign of picking up in the foreseeable future, market sources
told IM in September.
One Asia-based trader said that
ilmenite prices that stood at $440/tonne two years ago were now
down to around $140/tonne on a CIF China basis.
“There is nothing on the
horizon to suggest that ilmenite prices will not keep going
down,” the source said (see p56).
“When companies say that they
expect the market to turn around in six months’ time, what
they mean is that there is no chance of the market improving
for at least half a year,” they added.
Other market commentators pointed
out that small mineral sands miners, whose projects are heavily
reliant on ilmenite, could find themselves in trouble in the
near term.
IM’s prices
for ilmenite (bulk concentrates, min 54% TiO2) have
been revised to $140-155/tonne CIF China.
TiO2
Sources observed that “supply
chain mismanagement” and unsustainable pricing strategies
in the ilmenite market in recent years have been exacerbated by
weaker economic conditions and softer demand from the
TiO2 pigment industry.
This mismanagement has resulted in
too much ilmenite available in the market, meaning that even as
TiO2 demand begins to improve globally, prices of
feedstocks are continuing to decline.
IM’s prices
for TiO2 pigment (high quality, bulk) currently
stand at $3,140-3,230/tonne CFR Asia; Û2,600-2,640/tonne
($3,420-3,475/tonne*) CIF Northern Europe; and
$3,360-3,400/tonne CIF US.
Market
commentary
Rising demand and a slight
improvement in prices for TiO2 pigments have failed
to lift prices for feedstock minerals.
Reports from China indicate that
pigment prices have improved slightly on the back of rising
exports coupled with a cut in domestic mineral sands output
over the summer months, while European and US producers have
reported strong demand in mature markets.
These trends are not reflected in
prices for ilmenite and rutile, however, with miners running
operations in China and Africa reporting lower selling values
in the second quarter and throughout July and August.
Sources suggested that while
feedstock inventories are normalising, they have not so far run
down sufficiently to generate restocking and higher prices.
At the end of August,
Ireland-headquartered Kenmare Resources Ltd posted a loss of
$31.8m for H1 2014, blaming lower year-on-year prices for
ilmenite.
CEO Michael Carvill said that the
arrival of new mineral sands supply on the global market was
preventing a price recovery and noted that improvements in the
TiO2 industry have so far not had a meaningful
positive impact on feedstocks.
A raft of reforms to improve the
environmental performance and energy efficiency of Chinese
TiO2 plants could have a positive impact on prices
in the medium term, as companies upgrade their technology which
is likely to increase costs.
The wide availability of feedstock
material on the market means that many deals are still being
concluded below list prices. New benchmark contract values are
expected to be announced towards the end of September, although
these had not been reported at the time of going to press.
Oilfield minerals - braced
for the cold
Frac sand
Prices of silica sand suitable for
fracking (frac sand) in North America were approaching
$80/tonne in Q2 2014 and while the market saw some softening
over the summer months, market observers believe that average
tonnage values will shoot up again for the fourth quarter.
Market
commentary
North American frac sand buyers
have been warned to expect a surge in prices over the winter,
as long-range meteorological forecasts suggest that the
continent is set to experience abnormally cold conditions for
the second year in a row.
Jack Cooper Holdings, the largest
auto-transporter in North America, said in September that
potential polar vortex conditions combined with a recovering US
economy, which has translated into higher demand for freight
capacity, could see a return of the bottlenecks that virtually
paralysed frac sand distribution last winter.
Logistics costs account for more
than 50% of the delivered price of frac sand, meaning that
buyers without vertically integrated transport solutions can
see their costs skyrocket when supply chains become
strangled.
“Fracking didn’t begin
recovering from winter until April or May this year,” the
online oilfield publication, Down Hole Trader
commented at the beginning of September.
“The result has been a
scramble to catch up. But, we just haven’t gotten there,
with continued rail delays and railcar shortages. Soon, the
fall harvest will be hitting logistics channels and winter will
follow,” it added.
The allocation of freight capacity
for grain transportation is also likely to hit frac sand
logistics, market observers have warned.
*Conversion made September
2014
Full information on all IM’s
prices can be found on the IM Prices Database
online.