Plunging fluorspar prices weigh heavily on South African miners

By Shruti Salwan
Published: Friday, 20 March 2015

High stocks, low demand cause price drops; SA fluorspar sector in flux as investor interest wanes.

South Africa’s fluorspar industry continues to struggle amid difficult market conditions, as asset sales and infrastructure challenges squeeze investor confidence in the industry. 

South Africa has the world’s largest fluorspar reserves, but its fluorspar miners are bearing the brunt of uneconomic mining conditions, operational limitations, punitive legislation and more recently, China’s attempt to liquidate its own fluorspar inventories at record low prices. 

Total fluorspar exports from South Africa have decreased by over 22% since 2010, when prices started to rise. 

Out of the country’s three fluorspar mines, Vergenoeg – owned by Minersa; Buffalo – owned by Rigiro Stone; and Witkop – owned by Vanoil Energy Ltd, only Vergenoeg was in production in 2014. 

Most of the fluorspar mined from Vergenoeg is acid grade and is exported to Europe, the United Arab Emirates and India. However, small volumes are also consumed domestically by the country’s only fluorochemical producer, Pelchem. 

Production at the other two mines – Witkop and Buffalo – remained suspended because it was uneconomical to produce fluorspar from these projects in such weak market conditions, sources told IM Data

The previous owner of the Wiktop and Buffalo mines, UK-based Fluormin Plc, disposed of them when the market started to stumble in 2012. 

The Buffalo mine was mothballed in 2008 due to inaccessibility of high grade material, high phosphorous occurrence and water shortages. The mine is now operating as Rooiberg Stone and is producing aggregates for roads.

The Witkop mine was also put on care and maintenance in 2012, when operating costs became challenging against a backdrop of lower cost fluorspar production worldwide. Although claims have been made that the Wiktop mine, now owned by Canada-based Vanoil Energy Ltd, is likely to resume operation by H2 2015, the viability of the project remains bleak under current market conditions. 

IM Data sources said that producers who were struggling when prices were high are unlikely to re-enter the market in the current environment.

South Africa has substantial deposits of high-quality fluorspar, which have a range of uses mainly in refrigerants, foundries and ceramics. At 41m tonnes, the country accounts for the largest proportion of global reserves (18%), followed by Mexico (14%) and China (9%). 


FOB Durban prices down 24% y-o-y

The price of South African acidspar (97% CaF2, dry filtercake) began to fall in Q2 2014, reaching an average of $355/tonne. However, by May 2014 these prices had fallen to $325/tonne, which was on a par with prices from China at the time. 

According to IM Data, prices for acidspar (97% CaF2, dry filtercake, FOB Durban) dropped by 24% in 2014, falling from the highs of $415/tonne in Q1 2014 to $315/tonne today.  

The drop was a result of increasing market pressure caused by large inventory stockpiles, limited demand and weak growth in downstream markets. 

Demand-side pressures have seen prices stabilise across the world since February 2015, but demand-side pressures from Chinese suppliers have prevented any significant upturn in the market. 

A further drop in acidspar prices from these markets is likely in the coming months.   


Acidspar exports double as metspar bottoms

South African acidspar exports doubled in 2014, up by 105% year-on-year (y-o-y), while metspar exports bottomed to below 50 tonnes – the lowest level in over a decade. 

This upturn in South Africa’s exports is largely backed by price adjustments made by suppliers in order to compete with low cost Chinese supplies. 

While the majority of South Africa’s exports were shipped into the European market, the US also benefitted from the discounted prices seen from the region. 

Total acidspar exports reached 255,769 tonnes for 2014. Imports into Europe were up 120% y-o-y at 153,256 tonnes. 

Most of the mines in Africa have higher average production costs, which compelled many to cut back production as margins tightened. 

Last year also saw the closure of the Okurusu mine in Namibia, which equated to over 4% of acidspar production outside of China, with smaller decreases in output from Kenya and Morocco.

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