Potash and barite supply tightens while fused magnesia faces overcapacity

By Laura Syrett
Published: Wednesday, 29 October 2014

Antimony, iodine suffer from slow China growth; Tough times continue for TiO2 pigment market; FM producers storing up trouble for the future

The fourth quarter of 2014 arrived bringing with it scant comfort for producers of chemical-making minerals, including antimony, iodine and mineral sands. Further downward pricing pressure has been reported in these markets, a trend blamed partly on falling Chinese consumption.

Titanium dioxide (TiO2), in particular, evidenced no reassuring signs of a market turnaround, while rising prices for refractory grade magnesia came with the caveat that some markets were heading for oversupply.

In the oilfield mineral industry, a squeeze on the availability of barite (barytes) from India narrowly missed the summer peak drilling season in the US, but with no indication of new mining contracts being issued in India, the oilfield procurement business remains in a nervous state.

Agriminerals - potash prices continue to recover

Potash

North American prices for granular potash increased in September to over $400/s.ton, market reports indicated.

List prices of $410/s.ton on an FOB warehouse (ex-works) basis were reported for muriate of potash (MOP), loaded onto trucks or railcars.

Prices and demand for standard potash, which is a cheaper alternative nutrient preferred in Asia and emerging economies, are also reported to be on a positive trajectory, particularly given the late improvement in the Indian monsoon rainfall levels.

Potash muriate (KCl, standard, bulk) is priced at $350-410/tonne, FOB Vancouver, on the IM Prices Database.

Market commentary

Granular potash is a more expensive, premium quality type of the crop nutrient mineral, for which the relatively wealthy regions of North America and Brazil are among the largest global markets. Combined consumption of granular potash in these regions is estimated at about 16.5m tpa.

In its third quarter Market Analysis Report released in mid-September, Canadian agrimineral producer Potash Corp. of Saskatchewan (PotashCorp) said that signs of a record harvest in the US, combined with tightening supply conditions, are likely to support potash prices for the rest of this year, despite a fall in crop prices.

"Crop prices have declined since mid-May, mainly due to higher planted area and favourable growing conditions in the US. However, we believe commodity prices remain at a relatively supportive level compared to fertiliser prices," PotashCorp said.

"In addition, we anticipate there will be a large requirement to replenish nutrients removed by this year’s crop," it added, forecasting that shipments in 2014 will pass the 58m tonne mark.

Both Societe Generale and Scotiabank have recently released reports predicting stronger potash prices next year, based on robust market fundamentals and overall growing demand for fertilisers.

Chemicals - antimony and iodine on the slide

Antimony

Trioxide grade antimony ingot prices fell at the end of September as softness in the downstream antimony trioxide market continued to impact feedstocks.

Sources in China reported that few deals for antimony trioxide were concluded towards the end of the third quarter. Prices in mid-September tumbled by around $200/tonne.

Sluggish activity in the construction and manufacturing sectors, where antimony trioxide is used in flame retardants, has been blamed for the decline.

Antimony trioxide (typically 99.5% Sb2O3) prices stand at $7,750-7,850/tonne (5-tonne lots) on a CIF Antwerp Rotterdam basis and at $7,700-7,900/tonne (20-tonne lots), FOB China.

Prices for antimony ingot (99.65% min) have dropped to $9,000-9,100/tonne from $9,100-9,200/tonne on an FOB China basis and to 9,000-9,150/tonne from $9,100-9,300/tonne, CIF Rotterdam.

Metal Bulletin reported that prices for standard grade antimony were at $9,000-9,200/tonne in mid-October.

Iodine

The slide in iodine prices continued to drag down the value of drums of iodine crystal (99.5% min) in both spot and contract markets in October.

Demand was said to be quietly steady, but buyers have a choice of material in the market and are negotiating prices down, IM learned.

Based on market feedback, IM assesses that prices now stand at $34-39/kg, down from $35-40/kg, with the softness being led by deals on Chilean iodine.

One US-based company told IM it was still managing to close a handful of small sales at around $42/kg, but admitted that the bulk of deals are now being concluded in the mid-$30s range.

A producer said that, although the market bottom has yet to be realised and prices have already sunk lower than many would have predicted three years ago, a market inflection could be due in the foreseeable future, which will see values rise rapidly and without warning.

Market commentary

Deceleration in Chinese economic growth and manufacturing activity is thought to underlie the global softness in chemicals markets, although for iodine this weakness is being exacerbated by aggressive marketing from Chilean producers.

Participants in both industries have reported that Chinese demand has fallen away over the course of the year, with consumption in domestic markets and exports retreating in the face of rising excess capacity.

China published figures indicating a surprisingly strong trade performance for September, showing an overall increase in exports of 15.3% year-on-year.

The data caused mining stocks on the London Stock Exchange to rally in mid-October, but discrepancies between China’s export statistics and import figures from goods destinations (including Hong Kong, which reputedly saw a 34% surge in exports from China), raised doubts over the reliability of the numbers.

Fake invoicing to benefit currency speculators has been suggested as a possible explanation for the discrepancies, but this has done little to assuage fears about China’s economic health and the effect a decline will have on raw material prices.

Mineral sands - tough times for TiO2

TiO2

Delegates as the TiO2 World Summit 2014 in Montreal heard in early October that prices for TiO2 pigment and its main feedstock minerals, ilmenite and rutile, remain under pressure while the wider industry is in a state of flux.

Reg Adams, managing director of UK-based minerals and pigments intelligence provider, Artikol, said that TiO2 prices are unlikely to trend upwards before the end of 2015, after which they may see a slight increase.

Separately, Laurence Wang, business manager at Tinox Chemical LLC said that titanium feedstock shortages in China a few years ago led to rapid expansions in production capacity, which caused prices to fall.

IM’s prices for TiO2 pigment (high quality, bulk volume) currently stand at $2,600-3,100/tonne on a CFR Asia basis.

Ilmenite

Wang added that the decline in Chinese ilmenite prices has been even steeper than that seen outside China.

Ilmenite (bulk concentrates, min 54% TiO2) prices are reported to be around $140-150/tonne on a CIF China basis.

Rutile

Rutile prices, on the other hand, face a more certain future, according to Wang. In contrast to predictions for rutile prices outside China, these are expected to begin to see improvements by the second quarter of 2015, he said.

Rutile (concentrate, min 95% TiO2, bulk) prices are assessed as being $820-950/tonne, CIF China.

Market commentary

TiO2 pigment consumption tracks GDP and is suffering from the slowdown in China, according to Wang.

Lower consumption has meant TiO2 and feedstocks markets are leaning towards significant oversupply, although Adams said that while restructuring is underway at many of the world’s major TiO2 producers, further major changes on the supply side are unlikely in the near future.

Following the price spikes in TiO2 in 2011-2012, major pigment producers started thrifting with the pigment, replacing it with cheaper alternatives. This trend has continued, even though prices have since fallen back, as TiO2 consumers are cautious about future price volatility.

However, Adams argued that substitution is unlikely to have any significant effect on the industry in the long, run as "interest in this area dies away as soon as prices revert to normal, which is something we are seeing now".

Oilfield minerals - ore out of stock

Barite

Buyers of Indian drilling grade barite reported that some grades of the oilfield mineral were unavailable from India in October, as the market continued to await the conclusion of domestic tenders to mine and market barite ore.

At the time IM went to press, the tenders had still not been issued, and sources in India said that there was still "a lot of political wrangling" that needed to take place before contracts could be settled.

According to US importers, drilling grade barite was unavailable for both specific gravity (SG) 4.20 and SG 4.10 grades (underground lump, OCMA/API) on an FOB Chennai basis in the first two weeks of October. These were trading at $138-145/tonne and $110-125/tonne, respectively, at the time of going to press.

Meanwhile, prices for Chinese SG 4.20 drilling grade barite (API, underground lump, FOB China) have narrowed downwards to $115-125/tonne from $115-130/tonne, sources said, and SG 4.10 material (FOB China) is priced at $110-115/tonne.

Elsewhere, prices for Turkish drilling grade barite have risen by an average of 8% from levels seen two years ago, market participants have indicated to IM.

Pricing data received from European sources suggest that prices for Turkish barite (ground, OCMA/API, big bags [1.5 tonnes], FOB Southern Turkey) are now in the range of $164-168/tonne, up from $150-155/tonne in 2012.

Market commentary

US-based market participants told IM that, as peak summer demand for drilling barite in North America is now passed, the squeeze on supply caused by the Indian tender situation has not left the market short enough to send prices up.

Separately, the Indian government’s decision to increase royalty rates for all domestically produced major minerals is set to make India one of the most expensive raw material suppliers in the world, industry observers have warned.

Taxes will be raised on 51 minerals, including barite for which the royalty now stands at 6.5%, with the exception of coal, lignite and silica sand for stowing (packaging and shipping), under the provisions of Mines and Minerals (Development and Regulation) (MMDR) Act 1957.

For Turkish material, one domestic producer said that incremental increases in production costs were partly responsible for the rises seen in this market, but that prices have been helped by robust demand for barite in European and North African oilfields.

This view was supported by traders, who said that oilfield mineral consumption in Europe, in particular, had picked up over the course of 2013 and remained healthy during the first half of 2014.

Refractory minerals - China magnesia price rises

Magnesia

Prices for Chinese refractory grade magnesia products are increasing, market participants informed IM in late September.

One US-based source who has direct dealings with Chinese suppliers, said that "prices are going up; luckily, we got all of our barges filled ahead of the increases, which saved us a lot of money".

Sources in China said that prices were going up because the cost of a licence to export magnesia under the Chinese quota system has recently increased to Chinese renminbi (Rmb) 800/tonne ($130/tonne*).

Additional resource (Rmb 15/tonne [$2.44/tonne]) and water (Rmb 1.3/tonne [$0.21/tonne]) taxes levied on magnesite mining are also pushing up costs.

IM’s prices for deadburned magnesia (DBM) 90% MgO (lump, FOB China) have been revised to $270-290/tonne, up from $255-270/tonne. Prices for DBM 92% MgO (lump, FOB China) have been adjusted to $300-380/tonne from $320-400/tonne.

For fused magnesia (FM), global expansion in production capacity could cause prices to plummet in the near future, market participants have warned.

Speaking to IM at the 57th International Colloquium on Refractories in Aachen, Germany, in September, traders and producers alike expressed concern over the rising production levels, particularly in Asia where many have a cost advantage over Western companies, creating an excess of material in the market.

IM’s Chinese FM prices currently stand at $980-1,050/tonne (98% MgO, lump, FOB China); $850-950/tonne (97% MgO, lump, FOB China); and $600-630/tonne (96% MgO, lump, FOB China).

Market commentary

Some non-Chinese sources said that there appears to be confusion in the market, with one US buyer saying they thought that the licence fee for magnesia had been cancelled, leading to a purchasing rush.

Major Chinese magnesia producers Haicheng City Rongli Magnesia Co. and the Liaoning Provincial Non-Metallic Mineral Association have both said that the quota and licence system has not, and will not, be cancelled, however.

There have been a number of rumours in recent years that the export licence system will be removed as China consistently fails to fill up its quota, but the country relies on the mechanism to help it eliminate outdated production capacity and control production.

China exported around 23% more magnesia in H1 2014 compared to 2013, although volumes shipped still fell short of permitted limits.

China’s Ministry of Commerce (MOFCOM) website contains a current list of company’s awarded licences to export DBM, FM, magnesia composites and brucite in 2014, suggesting that the system is still in place.

The Liaoning Mineral Association said that prices are steady at present but are expected to increase in the coming weeks, as September and October are traditionally busy months for magnesia purchasing, both domestically and internationally.

*Conversions made October 2014

Full information on all IM’s prices can be found on the IM Prices Database online at www.indmin.com/pricesdatabase. For fluorspar and graphite prices, please visit the IM Data mineral tracker pages at www.indmin.com/fluorspar and www.indmin.com/graphite.