Tough times for many in 2015

By Laura Syrett
Published: Saturday, 27 December 2014

Energy minerals still waiting for battery lift off; chromite market bearish over next 12 months

Many industrial mineral markets are bracing themselves for a challenging year in 2015, after prices for refractory, chemical and pigment minerals saw out 2014 on a flat-to-weak note.

There was scant optimism for refractory grade chromite as stagnant demand and increasing reclamation activity continue to take a toll on prices.

Iodine producers, meanwhile, may take cold comfort from predictions that prices will not go below $25/kg, although margins are already either strained or non-existent in this market.

For energy minerals, graphite is making the best of a broadly flat market outlook, but lithium ended the year on a high with prices regaining ground lost during a lull in the battery demand hype at the beginning of Q4.

Rare earths, however, were just beginning to settle when China revealed that it plans to increase taxes on the minerals next year - a move that is likely to further spook already jittery downstream buyers.

In other markets, kaolin and calcium carbonate producers have been increasing list prices as they look to cover rising operating and logistics costs.

Ceramic minerals - Imerys raises prices

Kaolin and ball clay

Imerys Ceramics North America announced in early December that it plans to raise prices for US-produced ball clay and kaolin products by 15% from 1 January 2015, or as contracts allow.

The hike in kaolin prices is double that announced by rival suppliers, including US-based KaMin LLC, which announced in early November that it will raise prices for its paper and industrial grade kaolin products by 5-7% from 1 December, and its Brazilian affiliate company, CADAM SA, which said it would simultaneously introduce increases of 6-8% for paper grade kaolin.

Germany-headquartered chemicals company BASF also said in November that it would increase its industrial grade kaolin prices globally by up to 7%, with immediate effect.

Market commentary

Imerys said that the price increase "supports investment in manufacturing, quality systems, maintenance, environmental compliance and new product development".

The company also reiterated a warning it issued in an earlier price increase announcement for its North American calcium carbonate products, that customers should expect to see costs rise due to volatile and increasing local rail and truck freight rates.

Chemicals - iodine won’t crash, antimony might

Antimony

Prices for trioxide grade antimony ingot fell victim to further declines after standard grade II material dropped by $50/tonne in mid-December, to $8,650-8,850/tonne.

IM’s prices for antimony ingot (99.65% min) have been revised down to $8,750-8,950/tonne from $8,900-9,000/tonne on an FOB China basis. Prices for antimony trioxide (typically 99.5% Sb2O3, 20 tonne lots) currently stand at $7,700-7,900/tonne FOB China.

Iodine

The price of iodine is unlikely to fall below the $25/kg mark, industry observers have told IM, despite indications that the market was sinking further at the end of 2014.

IM’s prices for iodine crystal (99.5% min, drums) stand at $31-37/kg on a contract basis and at $31-35/kg on a spot basis.

Market commentary

Sources told IM in December that antimony trioxide prices were flat, as the market for the flame retardant chemical remains stagnant. 

A report by Metal Bulletin said that antimony ingot prices reached at their lowest point since mid-2010 towards the end of last year and that it is unclear where values will go from here, as prices are already below production costs.

China’s Fanya Exchange has been credited with mitigating the fall in prices as it took material out of the market to bolster its own reserves. The bourse is now reported to have ceased buying antimony, however, and is adopting new rules after an official probe into its market practices. 

For iodine, reports in late November suggested that Chilean prices for the mineral had fallen to less than $30/kg as a result of weak demand coupled with aggressive marketing from suppliers, although this was thought to be limited to very large contract orders.

One US-based market analyst told IM they expected prices would slip into the high $20s/kg range, but thought it was unlikely values would fall much further.

Another source, whose company buys iodine from Chile, said they thought the market would bottom slightly below $30/kg in the next year, before rising to settle around $32-33/kg.

In Asia, iodine prices from Japan remain higher than those in Chile while prices in India for re-exported iodine are reported to vary, with prices of $29/kg or less cited for some contracts.

Energy minerals - on the level as prices steady

Graphite

Natural graphite prices are expected to remain flat in 2015 with the potential for marginal increases in some grades, delegates at the 4th IM Graphite and Graphene Conference in Berlin, Germany, heard in December.

Prices for synthetic graphite have also levelled out, with industry participants tentatively suggesting that prices for electrodes have now bottomed and should see some recovery in line with an improving global steel market next year.

Lithium

Prices for lithium hydroxide (LiOH) and lithium carbonate were reported to have increased slightly at the end of November, following a period of gradual decline which began in the middle of 2014.

Sources reported that lithium spot prices had improved but that demand had not increased significantly, saying that consumption remains strong but steady.

IM’s prices for lithium hydroxide (56.5-57.5% LiOH, large contracts, packed in drums or bags, del. Europe or US) have been increased to $7.5-8.5/kg from $7.2-8/kg.

Prices for lithium carbonate (large contracts, del. continental US) have been raised to $6-6.5/kg from $5.8-6.5/kg.

Rare earths

The Chinese government’s proposal to impose new resource taxes on rare earths is likely to add premiums to future contract prices for the minerals as suppliers seek to incorporate the additional costs, market observers believe.

Plans announced in November for a 22% tax on light rare earths and a 35% tax rate on heavy rare earths from ionic clays in southern China are expected to be passed in the coming months as the country seeks to claw back revenue from the sector.

China’s resource tax on light rare earths, including bastnaesite and monazite ores, has been at Chinese renminbi (Rmb) 60/tonne ($9.60/tonne*) since April 2011, with tax on medium and heavy rare earths amounting to Rmb 30/tonne ($4.80/tonne).

Taxes aside, dysprosium traders were reported to be restricting the flow of material to the market in late November the hope of pushing up prices. Prices for dysprosium oxide (99% min) were reported to be $240-250/kg on an ex-works China basis, while FOB prices stand at $320-375/kg, and remained within these ranges towards the end of the year.

Weak physical demand for rare earth minerals continued to characterise the wider market, meanwhile, with most prices flat or declining marginally in December. Praseodymium-neodymium oxide compound prices were said to have weakened slightly to around $44/kg in line with soft consumption in 

the neodymium-iron-born (NdFeB) magnet industry.

Market commentary

In a keynote presentation delivered at the IM meeting in Belin, Stephen Riddle, president of US-based Asbury Graphite Mills, said that there is more than enough worldwide production capacity to meet demand for most grades of flake graphite today.

"The battery market isn’t here yet, in terms of demand growth," he said and urged junior graphite developers to use "realistic" price projections to assess the economics and profitability of their various projects.

Gerry Hand, vice president for marketing at Superior Graphite, said that pricing for flake graphite has been "basically flat" in the last year and is likely to remain stable or increase slightly in 2015.

He said that despite the current global oversupply situation, there is still room for an additional 30,000 tpa of "good quality, reasonably priced graphite" in the market, preferably from less risky Chinese sources.

IM Data analyst, Andy Miller, said that while the industry continues to face pricing challenges linked to oversupply and flat demand at weak levels, near term consolidation in Chinese supply and longer term growth from batteries for the electric vehicle market offer some justifiable hope of the market achieving sustainable price levels in the coming years.

For lithium, one US source speculated that the recent decision by FMC Corp. to increase its list prices for LiOH and lithium carbonate from 1 December had prompted producers to try introducing higher offers into the market and that these will have been accepted by buyers as there is not a great deal of slack in the supply market.

Industry reports also suggest that Chinese buyers may have upped orders to tide over manufacturing during the Christmas period, although this theory has been questioned by others who said that buying activity in China remains weak.

News that construction of Tesla Motors’ lithium-ion (Li-ion) Gigafactory in Nevada, US, is running approximately a year ahead of schedule has also stirred some interest in the lithium market towards the end of the year, although the completion date for the facility is still set for 2017.

In the current rare earths trading environment, Chinese dysprosium prices were reported to be continuing their positive trend in December, which began at the beginning of the previous month, after the launch of a dysprosium contract on China’s Fanya Exchange on 31 October created a frisson in the market.

Speaking at the 10th International Rare Earths Conference in Singapore in November, Scarlett Zhang, vice president of the Fanya Exchange, said that the bourse had no plans to list any more rare earths in the near future.

The prospect of increased volatility in 2015 is likely to quell already lacklustre demand further, as downstream consumers prefer to use substitute technologies than be at the mercy of supply uncertainty.

China is expected to announce its export plans for the first half of 2015 at the turn of the year.

Mineral sands - zircon recovery six months off

Zircon

Prices for zircon are not expected to rise for at least the next six months, sources told IM at the beginning of December.

Prices for standard grade zircon (min 65.5% ZrO2, bulk) stand at $1,080-1,100/tonne on a CIF China basis, while premium grade material (min 66.5% ZrO2, bulk) is priced at $1,050-1,150/tonne CIF China.

Market commentary

Industry insiders canvassed by IM said that currently published price ranges for zircon are "ballpark correct", but that they see no prospect of a market recovery until at least the middle of 2015.

"It’s a tough time for many at present," one Australia-based source said.

In September, IM published analysis by Roskill Information Service which suggested zircon markets were on track to stabilise and begin to recover by the end of 2014, although this was not expected to lift prices immediately.

Earlier this year, sources told IM that zircon prices were being undermined by substitution and thrifting of zircon by downstream consumers.

Buyers are also reported to be 

angry that miners appear to have been using zircon prices to recoup losses sustained on sales of other mineral sands such as rutile and ilmenite.

Oilfield minerals - Indian barite prices to jump

Barite

The government of Andhra Pradesh in India has cancelled 32 barite (barytes) mining leases that were issued in Mangampeta, Kadapa district in 2004 and has said that fresh licences will be issued by global tenders.

Sources contacted by IM said that Indian barite prices are expected to jump by 30% once tenders to mine barite in Andhra Pradesh have been completed next year, although no material is expected to be mined before February 2015.

Indian newspaper The Hindu reports that the value of Mangampeta’s barite reserves stands at INR 500bn ($8.07bn) and that the cost of 'A grade’ material from the deposit is around INR 4,457/tonne ($72/tonne) at site, with an export selling price of INR 9,112 ($147/tonne) FOB Chennai.

IM’s prices for OCMA/API grade material currently stand at $110-150/tonne FOB Chennai, depending on grade.

Market commentary

One US source told IM in December that Indian barite was "completely off the table" and that it was unclear how the situation would develop.

Barite prices increased by an average of 70% following the last Indian tender in 2011. If contracts to mine barite in Andhra Pradesh are put out to global tender as suggested, India could see an influx of international miners into the sector, which could increase competition and force down the price of barite, although growing demand from the oil and gas industry is likely to support the market for drilling grade material.

Refractory minerals - crunch time for chromite

Chromite

Refractory and foundry grade chromite prices are set to face challenging market conditions in 2015, market insiders have told IM.

Prices were reported to have softened in the fourth quarter of 2014, with further weakness expected in the new year.

IM’s prices for foundry grade +47% Cr2O3 material (dried, 1 tonne big bags, FOB South Africa) and 45.8% min Cr2O3 material (wet bulk, FOB South Africa) have been revised to $300-380/tonne from $340-420/tonne and $280-340/tonne from $280-360/tonne, respectively.

Refractory grade 46% Cr2O3 material (wet bulk, FOB South Africa) has been adjusted to 250-280/tonne, down from $300-330/tonne.

Market commentary

One global supplier of non-metallurgical grade chromite said that they had observed price decreases in Europe, Asia, South America, China and Australia.

"The situation is tough everywhere at the moment. Our global customer base are all reclaiming 

and switching to greener alternatives. Investment in mining is at an all-time low and foundries are 

not busy at all," they said, adding that demand was almost 50% 

down on previous yearly averages in 2014.

"In general, it will be a very tough market in 2015," the source said.

One North American source said that their negotiations suggest that prices are currently stable, although they explained that they were only selling limited inventory in a few regions.

Sources disagreed over market conditions in India, with some reporting low consumption which they believe is likely to be a permanent market adjustment, while others said that demand is likely to recover from the present weakness in foundry and refractories.

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.

*Conversions made December 2014