High inventory levels keep price recoveries at bay

By Laura Syrett
Published: Tuesday, 24 February 2015

US clays see further price increases; TiO2 market recovery postponed until 2016; Indian barite prices poised to leap.

Lingering inventories in rare earths and titanium dioxide (TiO2) markets are frustrating hopes of recovery in these sectors, IM learned in February. Elsewhere, market observers have warned of an imminent price jump for Indian drilling grade barite (barytes), while most other markets remained stable under steady but subdued trading conditions in recent weeks.

US clays see further price hikes

Kaolin and ball clay

The US’ only privately owned clay producer, southern states-based Old Hickory Clay Co. and its subsidiary, Gleason Clay Co. LLC, are to increase their prices for kaolin and ball clay by 4-8%, effective 1 March. The increases will vary according to grade and are subject to existing contracts.

IM’s prices for paper coating grade kaolin (ex-Georgia plant) currently stand at $118-190/s.ton.

Market commentary

Old Hickory’s CEO, Lee Powell, said that the higher prices are necessary to offset cost inflation. The company’s decision to up its prices for kaolin lags those of locally based rivals, Imerys Ceramics, KaMin and BASF, which each announced price increases towards the end of last year. Imerys Ceramics North America, which also announced price rises for ball clay, put up its selling prices by 15% from 1 January.

KaMin raised its prices for industrial grade kaolin by between 5-7% in December last year, meanwhile, and BASF made its products up to 7% more expensive at the beginning of November 2014.

All of the companies blamed higher costs for the price hikes, while Imerys also warned that volatility in the freight market could inflate delivered prices over the next year.

Energy minerals - stability for rare earths

Rare earths

Hopes that rare earths prices would firm up noticeably in February had failed to materialise by the time IM went to press, although there was some positivity in some areas of the market, including europium.

IM’s prices for europium oxide (min 99%, bulk, FOB China) currently stand at $690-750/kg.

Market commentary

Shorter supply during the Chinese New Year holiday and anticipation that China’s State Reserve Bureau will begin stockpiling rare earths - although this is likely to be limited to heavy elements including europium and dysprosium - was expected to lift rare earths prices in February.

Well stocked inventories remain an insurmountable barrier to a decisive firming in the market, however, and prices for all rare earths have been broadly stable since the end of last year, with some minor fluctuations around IM’s published ranges.

Mineral sands - no recovery before 2016

TiO2

TiO2 prices are unlikely to see a lift before 2016, but the long term fundamentals for the market are strong, industry analysts have said. Prices for ilmenite, rutile and TiO2 are stable towards the lower end of IM’s published ranges at present, after dropping slightly towards the end of Q4 last year.

Ilmenite prices currently stand at between $150-165/tonne on an FOB Australia basis, while rutile prices range between $820-950/tonne on a CIF China basis and $840-$1,000/tonne on an FOB Australia basis, according to the IM Prices Database.

Market commentary

Speaking to IM at the Mining Indaba 2015 conference in Cape Town, South Africa, in early February, a source familiar with the Australian mineral sands market said that pigment raw material producers had little choice but to weather the storm.

"The market is in a tight spot at the moment," the source said. "There isn’t going to be any demand creation in this industry. You hear miners talking about inventories going down but until consumption picks up, they’re not going to need any more raw material".

One UK-based market observer said that TiO2 has a solid base which will underpin a strong recovery in the medium term, but noted that the fact that the drop in Sierra Leone production had no effect on prices indicated the weak state of the industry at present.

In mid-February, Australian mineral sands miner Iluka Resources posted an Australian dollar ($A) 62.5m ($48.9m*) loss for 2014, blaming weak prices and market conditions, while Cristal Global (see p20), Huntsman Corp. and Kenmare Resources have each announced job losses as lower prices force producers to cut running costs.

Oilfield minerals - mixed messages

Barite

The price of drilling grade barite from India could leap as high as $220-230/tonne CIF North America if proposed changes to the mining industry in Andhra Pradesh lead to a government-backed hike in export values.

Speaking at the Oilfield Minerals Middle East Conference in Abu Dhabi in late January, Bharath Reddy, head of operations and logistics at Andhra Pradesh-based Garuda Group, explained that the price increases would apply to SG 4.20 material.

CIF Middle East prices for Indian barite could increase to $200-215/tonne, meanwhile, Reddy said. FOB Chennai prices for drilling grade (OCMA/API, bulk, SG 4.20) material currently stand at $138-145/tonne.

In mid-February, IM reported that Chinese oilfield grade barite prices had fallen by up to $5/tonne in the face of weaker demand.

One Europe-based distributor said that the upper end of IM’s price range for Chinese SG 4.20 drilling grade barite (API, underground lump, FOB China) fell from $128/tonne to $123/tonne. Prices at the lower end of the range had only softened slightly, meanwhile, from $112/tonne to $110/tonne.

The drop was confirmed by US-based buyers, although they said that prices for other Chinese grades had remained stable.

Market commentary

Reddy said that a focus on producing high grade drilling material and a halt in Andhra Pradesh’s production since August 2014 as a result of changes to mine allocation policy had primed the Indian barite market for a price jump, and warned of further price fluctuation in the future.

At present, however, European sources said that in addition to lower demand, which could be a combination of a seasonal downturn in northern hemisphere drilling activity and lower oil prices resulting in well closures, the latest fall in Chinese prices could also be reflective of customers turning away from Chinese material in favour of other sources.

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.

*Conversion made February 2015