The global commodities industry is playing a
waiting game. Miners need a sustained uptick in demand to eat
far enough into inventories to create a realistic opening for
the new capacity many invested in so heavily during the boom
years.
Mineral and metal prices also need to recover
from their present state of depression in order for new
production lines to be run at a profit, rather than as just
another negative cash flow drag on already strained
budgets.
For bulk and base commodities like iron ore,
bauxite, copper and nickel, the immediate picture does not look
promising.
As Richard Blunt, a partner specialising in
M&A and project development at mining law firm Baker &
McKenzie told IM at the 2015 Mining Indaba
conference (see pp8-9) in Cape Town recently, "there
isn’t another China to come on stream". In other
words, the big eater at the commodities table has taken its
fill and will be moderating its intake according to its
stomach, rather than its eyes, from now on and nobody else has
quite the same appetite for the ever increasing spread.
For refractory minerals like alumina and
magnesia, this does not bode well either. Full year results
released by Austrian refractories and magnesia producer RHI AG
(pp21-22) illustrated a tough year for an industry
reliant on steel and cement manufacturing and has forced the
company to cut its fused magnesia (FM) and caustic calcined
magnesia (CCM) capacities in the face of weak market
conditions.
Even in India, which had been protected, to an
extent, from the industry’s broader problems,
refractories producers are starting to feel the pinch, as the
latest quarterly statements from IFGL and Orient Refractories
show.
Similarly, pigment minerals, whose consumption is
generally correlated to GDP, are in a tight spot. As Kasia
Patel, Deputy Editor, finds, seemingly relentless downward
pressure on titanium dioxide (TiO2) prices and
immovable stockpiles of feedstock minerals has forced
manufacturer Cristal Global to slash jobs (p20),
following in the wake of US rival Huntsman Corp. and Irish
mineral sands miner Kenmare, which have both cut workforces and
production capacity in recent months.
For iron oxide pigments which are mainly used in
the construction industry, a slowdown in building activity is
creating cause for concern, although it is also spurring
innovation in pigment production to create new price and
performance competitive products (pp49-51).
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A slowdown in consumption and rising
capacity for
mineral commodities paints a bleak picture for
companies
leveraged on new production investment.
Peter Craven
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The Tesla effect
Although IM is privileged to
cover speciality and niche markets that are often a step
removed from the direct influence of macro-economic forces, the
same principles of supply and demand still apply.
This is worrying investors in the energy minerals
sector, particularly those interested in lithium and graphite,
which last year received an adrenaline shot from the news that
California, US-based electric vehicle (EV) maker Tesla Motors
plans to build a lithium-ion Gigafactory in Nevada.
The beginning of March will mark a year since
Tesla made its announcement, which was swooped upon by junior
graphite and lithium miners as evidence that significant demand
creation was a realistic, if not dead certain, prospect.
IM Reporter, Josie
Shillito, has taken a look at the so-called "the Tesla
effect" has had on the battery minerals supply industry in the
last twelve months (pp31-32). Here, she highlights
concerns of analysts that extra lithium capacity, in
particular, is waiting in the wings for any upsurge in demand
– a shift that could put new producers out of the
running before they even begin.
A look at prices for battery grade lithium and
graphite (p59) shows that the flurry of excitement
created by Tesla was only lightly reflected in the numbers and
has since levelled out again in line with the prevailing strong
supply and soft demand situation.
Rare earths, meanwhile, have been more or less
bypassed by the Tesla enthusiasm. Although rare earths are used
to make high strength magnets for EV motors,
Tesla’s particular technology does not require
them and so far, market penetration of other EV models from
more established automotive brands have yet to catch the
public’s imagination.
However, it is widely agreed that action needs to
be taken to safeguard access to rare earths for manufacturers
of everything from smartphones to defence systems based outside
the world’s monopoly producer, China. In this
issue, contributors James Kennedy and John
Kutsch consider how a relaxation of the rules governing
thorium-containing materials and a renaissance in the nuclear
power sector could help to achieve this goal
(pp37-40).
Grow your own
In the agriminerals sector, meanwhile, the stats
are rather more encouraging. The indisputable metric
underpinning this industry is that the world’s
population is growing rapidly and millions of people continue
to face starvation.
Demand for fertiliser minerals therefore looks
set to grow solidly for the foreseeable future, as contributor
Frank Hart discusses in his article on the role of mineral
nutrients in agriculture (pp45-49).
IM Reporter James
Sean Dickson has also delved into this industry, with a
focus on new types of fertilisers being specially developed by
agricultural product specialists, which see an opportunity in
tailoring nutrient products to different soils and crop
types.
Laura Syrett
Acting Editor*
*Siobhan Lismore-Scott is on maternity
leave
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