Laura Syrett
The plunge in the price of oil over the last six
months has been given a mixed reception by the industrial
minerals industry, with various sectors reflecting on the
benefits of cheaper energy weighed against concern about the
deflationary impact of low oil prices on the wider economy.
US titanium dioxide (TiO2) producer
Huntsman Corp. said in early January that it expected to feel
long term benefits from the lower price of raw materials it
derives from oil refining - welcome savings when pigment prices
remain flat, despite evidence of a recovery in feedstock demand
noted by Iluka Resources Ltd.
Spot prices for oilfield minerals including
silica (frac) sand used in hydraulic fracturing (fracking) are
beginning to look fragile, meanwhile, in the face of dwindling
oilfield activity and rising production capacity. Price
declines are not expected in the near term, however, as
oilfield service companies still have contracts to fulfil this
year.
Elsewhere, the tumbling oil price looks set to
hit electric vehicles as conventional petrol-fuelled cars
become cheaper to run. This in turn is likely to hurt demand
for battery minerals like graphite or lithium, although whether
or not this weakness feeds through to prices will depend on the
duration of the oil slump.
Away from oil, a question mark hangs over
agriminerals this year, as buyers seek to prolong the discounts
they have been receiving since Q3 2013. Meanwhile, commentators
continue to debate the impact of China’s decision
to cancel rare earth export quotas in this market.
Agriminerals in for cloudy
Q1
Potash
In mid-January, North American potash trading
group Canpotex Ltd, signed a memorandum of understanding with
China’s Sinochem Fertilizer Macao Commercial
Offshore Ltd (Sinofert) for a minimum of 1.9m tonnes red
standard grade potash between 1 January 2015 and 31 December
2017.
Canpotex said that a price for the first delivery
had yet to be decided, but once this has been set, it will be
renegotiated every six months.
Scotia Capital Inc. said that it was expecting a
flat contract price of $305/tonne for the deal, citing recent
price declines in fertiliser mineral markets in North America,
where potash prices dropped by around 1% in the first half of
January, South America and South East Asia.
This has been compounded by indications from
Chinese buyers that they intend to resist higher prices for
potash given the low prices enjoyed last year and the present
lack of certainty over prices in the wider market.
Phosphate
Phosphate prices are also reported to have made a
weak start to 2015, thanks to declines in the value of products
such as diammonium phosphate (DAP) in key markets like
India.
Benchmark FOB Tampa, Florida, US prices for DAP
currently stand at $460-500/tonne on the IM Prices
Database.
Sulphur
In the sulphur market, prices are reported to be
following a more positive trajectory so far this year.
Saudi Aramco Trading set its February sulphur
price at $180/tonne FOB Jubail, Saudi Arabia, up $22/tonne from
its January contracts.
Aramco’s increase follows an
announcement earlier in January that Qatar International
Petroleum Marketing Co. Ltd (Tasweeq) and Abu Dhabi National
Oil Co. (ADNOC) had raised their January sulphur prices by
$23/tonne and $20/tonne, respectively.
IM’s price for
sulphur, FOB Middle East, now stands at $175-195/tonne.
Market commentary
Prices for potash, phosphate and other
agriminerals are yet to fully recover from the fallout between
Uralkali and Belaruskali in August 2013 - a break which saw the
termination of the joint Belarusian Potash Co. (BPC) marketing
business and sent potash prices tumbling worldwide.
Prices for potash and phosphate saw slight
rebounds last year before flattening out in Q4 at levels close
to those seen before the BPC split, but were down on previously
forecast growth targets.
Early market indications this year paint an
unclear picture for fertiliser mineral prices in the coming
months and Scotia Capital said that it retained a "cautious
view" of the potash market for H1 2015.
Chemical minerals
Antimony
Prices for trioxide grade antimony ingot and
finished antimony trioxide material are expected to fall
further this year, as support leant to the market by
China’s Fanya Metal Exchange is reined in.
IM’s prices for
antimony trioxide (typically 99.5% Sb2O3)
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.
Trioxide grade ingot (99.65% min
Sb2O3) stands at $8,300-8,600/tonne FOB
China and $8,400-8,750/tonne CIF Rotterdam.
Prices for standard grade antimony were assessed
as $8,200-8,500/tonne, according to Metal Bulletin
(MB) in mid-January.
Market commentary
Chinese sources told IM that
prices fell further at the end of last year following a
volatile 12 months in 2014. This culminated in December, with
many traders liquidating their positions in the antimony market
and producers seeking to shift stocks to generate cash
flow.
The Fanya Exchange had been buying up antimony
metal to create a stockpile for its antimony trading contract,
which was launched in March last year, but this purchasing
spree began to tail off in the final quarter of 2014.
MB reported that the belief that
production costs would provide a floor for antimony prices has
now been largely expunged, with market observers warning that
prices may drop into the $6,000s/tonne range.
If Fanya renews its purchasing drive later this
year, this may stem the decline, however.
Energy minerals
Graphite
Sluggish consolidation in the Chinese flake
graphite market did little to support prices in 2014 and this
malaise looks likely continue through the first quarter of
2015, according to analysis by IM Data.
Prices for flake graphite, 94-97% C, +100 mesh-80
mesh (FCL, CIF European port) stand at $1,200-1,300/tonne,
while -100 mesh material is assessed as $1,000-1,100/tonne.
In the vein graphite market, IM
Data’s prices remained stable for a third
consecutive year in 2014, in line with prices set by the Sri
Lankan graphite commission. High purity 99.1% C grade +1 mesh
material is priced at $2,800/tonne (FOB Sri Lanka) while 99.3%
material is traded at $1,550/tonne (FOB Sri Lanka).
Graphene
Spanish nano-materials group Graphenea announced
in January that it has cut the price of its graphene products
for 2015, thanks to improved yields and higher sales.
The company outlined that the price of its
multilayer graphene films has dropped by around 30% on average.
The price of Graphenea’s graphene on copper is now
$319 for a 4 inch (10.16cm disc), while a 2.5 litre bottle of
graphene oxide now costs $599 - around 40% cheaper than in
2014.
Rare earths
Rare earths prices remained unchanged in the
second half of December and into January, despite soft trading
activity, as China revealed that it intended to roll over its
export taxes, currently levied at 15-25%, into the first
quarter of 2015.
Prices for cerium oxide stand at $4.3-5.2/kg;
dysprosium oxide is at $320-375/kg; europium oxide is at
$700-780/kg; lanthanum oxide is at $4.3-5.2/kg; neodymium oxide
is at $58-68/kg; praseodymium oxide stands at $110-120/kg; and
samarium oxide prices stand at $4.8-6.5/kg.
Market commentary
In the graphite market, an abundance of Chinese
flake supply is continuing to supress prices, despite a
significant amount of capacity remaining offline.
While stricter government controls saw Chinese
flake graphite production fall throughout 2014, emphasis has
now shifted to the production of higher-value grades, moving
the spherical graphite market in particular into severe over
capacity and pulling down prices.
On the graphene front, meanwhile, CEO of
Graphenea, Jesus de la Fuente, said that his company aimed to
bring down the price of its graphene products every year for
the foreseeable future. He added that it was not the price of
graphene that prevented widespread commercial adoption of the
material, but rather bottlenecks in the development of
applications.
For rare earths, the announcement by
China’s Ministry of Commerce (MOFCOM) on 31
December 2014 that it had axed its export quotas on the
minerals (see p12) prompted fears that the market
would become flooded with Chinese material. However export
taxes are expected to remain in place until at least May this
year, which should restrict shipments.
Market observers have also suggested that the
imposition of higher resource taxes for rare earths, combined
with the ongoing consolidation of China’s domestic
rare earths industry will be used by the Chinese government to
control the amount of material on the market.
On the pricing front, some reports suggested that
prices had jumped slightly in mid-December as some buyers
sought to make last minute purchases in case tariffs increased,
but there was little evidence of a widespread firming in
selling values in the face of stubbornly weak demand.
Sources told IM that a lack of
certainty about the pricing and availability of Chinese rare
earths is highly damaging for the industry, as downstream
consumers cannot tolerate supply chain insecurity and will look
to engineer out of their reliance on the elements.
Oilfield minerals
Barite
Prices for drilling and paint grade barite
(barytes) remained steady into January, sources indicated to
IM, although some market participants said
that a reduction in freight rates is likely to lead to lower
prices for oilfield material later in Q1.
Chinese paint grade barite prices (Chinese lump,
FOB Fancheng, China) have been reported as $235-275/tonne.
Drilling grade barite prices are said to be flat
with the end of last year, according to North American and
Chinese sources, with values confirmed to be within
IM’s current ranges.
Frac sand
Prices for frac sand could flatten at rates below
those agreed between sand producers and oilfield services
companies for 2015 as oil and gas prices continue to tank,
market insiders have suggested to IM.
The price of US oil (West Texas Intermediate
crude) fell below $50/barrel in early January, for the first
time since April 2009, while Brent Crude dipped below
$53/barrel. Both have now lost more than half their value since
mid-2014, when prices were over $100/barrel.
Gas prices are also on the slide, with Citigroup
Inc. cutting its forecasts this year by more than 20%. Daily
Henry Hub gas prices will drop to an average of $2.70/million
British thermal units (mBtu), down from a previous forecast of
$3/mBtu, the bank said in January.
Prices for glass grade silica sand, which had
also seen a slight uptick thanks to growing oilfield
consumption and stable glass demand, have remained steady at
$27-30/tonne (container, ex-works US), while foundry material
(bulk, FOB DaNanag, Vietnam) is priced at $29-35/tonne.
Offers of sand for sale on trading boards suggest
that frac sand prices are flat with the final quarter of last
year, with market observers saying that the industry will need
to wait and see how oil and gas prices shake out before making
solid predictions on pricing for frac sand.
Market commentary
Lower freight rates for dry bulk material, which
slumped to six-year lows in January according to consultancy
IHS Maritime and reports by Hellenic Shipping News,
are predicted to lead to softer prices in the near term,
particularly in Asia, sources said.
In December, India-based sources said that prices
for domestically produced paint and drilling grade material
could jump by 30% once a fresh round of barite mining tenders
is completed.
New contracts are expected to be awarded in the
coming weeks, although no new barite is expected to be mined
before February.
Meanwhile, the lack of available material from
India and problems with the reliability of Chinese supply has
put pressure on prices for Moroccan drilling grade barite,
European sources said.
News that a new UK barite mine could be in the
pipeline (see p13) could alleviate some demand
pressure in Europe, however. In January, M-I, SWACO, part of
oilfield services giant Schlumberger, announced plans for
potential project at Duntanlich, north of Aberfeldy in
Scotland, to open in 2017.
In frac sand markets, it seems likely that the
shift to contracts over spot prices seen in the last year will
keep selling prices up for producers in the near term.
"Many companies which have tied themselves into
[frac sand supply] contracts for 2015 may come to regret being
so hasty," one US source, who preferred not to be named, told
IM.
They added that while oilfield companies will
need the pre-purchased sand to service existing operations for
the foreseeable future, they may find that they could have got
better deals on the spot market come the middle of 2015.
Fracking industry consultants PacWest said last
year that sand usage would increase by 20% each year in 2015
and 2016, but now believes that sand demand will stay flat as a
result of the weaker oil price.
Samir Nangia, a principal of PacWest, told the
Wall Street Journal that planned new silica sand mines
could add an additional 10% to existing frac sand production
capacity, which could create a glut and pull down prices.
According to the oilfield materials trading
website Downhole Trader, the combination of lower oil
prices and the usual seasonal pullback in oilfield activity are
likely
to be jointly responsible for the fall in
fracking activity in North America.
"Our desk has seen a slowdown in purchasing this
time of year, while pricing requests become more frequent due
to companies putting a pencil to new project analysis. It is
likely that both the winter slowdown and the oil prices are
influencing the market," the website stated in December.
Sand miners remain upbeat, however, pointing out
that for the next year at least, much of their output has
already been sold with robust margins.
At the end of December, the Freedonia Group Inc.
released a report stating that silica sand demand is expected
to grow by 5.5% per annum to reach 291m tonnes in2018, driven
by growth in glass, foundry and building products markets as
well as fracking.
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.