Price analysis: Chinese magnesia price wars; Asian challenges for GCC

By Laura Syrett
Published: Tuesday, 28 April 2015

Anonymous bidders drive down prices in magnesia at a time when industry still burdened by high inventories. Steel sector overcapacity a looming concern. In calcium carbonate meanwhile prices hold steady as market leaders control values, though end market overcapacity in Asia may hit demand. Producers seek margins on high grade products.

Fierce competition in the Chinese magnesia industry is putting pressure on prices, with producers facing unsustainably thin margins, IM learned at the China Refractory Association annual general meeting at the end of March.

Magnesia producers from the northeast quarter of China, the country’s main magnesia and refractories-producing region, said that anonymous bidders with large inventories to clear were forcing down prices in tenders to supply steel makers with refractory materials.

Margins for Chinese magnesia producers are now less than 5%, industry participants told IM. Many feel that infighting and a lack of cooperation within the industry are partially responsible for the sector’s problems, but few are optimistic for reform.

New government-enforced environmental protection measures are adding to production costs for magnesia producers, with many resisting the pressure to upgrade to more efficient equipment because of their meagre profit levels.

Mistakes in government policies have also eroded trust between regulators and industry, particularly with regard to changeable environmental legislation.

The elimination of steel production capacity in China is also worrying both magnesia producers and refractory product manufacturers. If a small steel company is wound up, suppliers are unlikely to receive payments owed for goods delivered, delegates at the meeting told IM.

Overcapacity in the steel and refractories sector is a further problem for upstream suppliers of refractory minerals like magnesia, as well as graphite, alumina and bauxite.

Daye Shi, director of Liaoning Provincial Non-Metallic Mineral Association, told IM that only the Chinese government is in a position to resolve the overcapacity situation via top-down measures.

"This problem cannot be solved by any company or association; the solution must come from government," he said.

Magnesia, dead-burned, 94-95% MgO, lump, FOB China, $/tonne

Price1 

Magnesia, dead-burned, 94-95% MgO, lump, FOB China, tonne $350-390

Magnesia, European calcined, agricultural, CIF Europe, tonne €240-350

Magnesia, dead-burned, 90% MgO, lump, FOB China, tonne $270-290

Magnesia, dead burned, 92% MgO, lump, FOB China, tonne $300-375

Magnesia, calcined, 90-92% MgO, FOB China, tonne $275-310

Magnesite, Greek, raw, max 3.5% SiO2, FOB East Mediterranean, tonne €65-80

Magnesia, dead burned, 97.5% MgO, lump, FOB China, tonne $450-480

Magnesia, calcined 94% MgO lump, FOB China, tonne $435-520

Magnesia, fused, 98% MgO, lump, FOB China, tonne $950-1,000

Magnesia, fused, 97% MgO, lump, FOB China, tonne $850-940

Magnesia, fused, 96% MgO lump, FOB China, tonne $600-630

Magnesia, fused, refractory grade, FOB USA, tonne $1,000-1,750

Magnesia, fused, European, FOB Europe, tonne $480-700

Magnesia, calcined 96% MgO lump, FOB China, tonne $480-580 

Calcium carbonate prices face possible challenges in Asia

Prices for ground calcium carbonate (GCC) are reported to be under pressure in Asia as overcapacity in key end markets like paper threatens to push down consumption.

According to independent consultant Ian Wilson, there is also likely to be price cutting in the Chinese GCC industry, taking producer margins down from their present 5-6% level to as low as 4%.

Industry sources said that companies operating in Asian markets, which include locally-based subsidiaries of Imerys and Omya, are looking to compensate for low profits on basic products with higher value offerings.

High margin products are gaining greater penetration into Asian markets as consumers become wealthier and look for better quality materials.

Globally, prices for calcium carbonate are broadly stable. Recently, producers in the US increased prices by between 5-10% to offset production cost inflation.

Strong domestic markets in many key calcium carbonate producing regions have shielded this mineral from the impact of currency fluctuations seen in other areas.

Calcium carbonate, GCC, 50-22 microns, FOB USA, $/s.ton

price2 

Calcium carbonate, GCC, 50-22 microns, FOB USA, s.ton $27-30

Calcium carbonate, GCC, 22-10 microns, FOB USA, s.ton $56-116

Calcium carbonate, GCC, 3 microns (untreated), FOB US, s.ton $188-205

Calcium carbonate, GCC, stearate coated 1.1-0.7 microns, FOB US, s.ton $300-441 



IM’s full price listing will now only be published online at www.indmin.com/PricingDatabase. If you have any comments or concerns, or wish to discuss any of the grades or prices listed, please contact Laura Syrett, Prices Editor, at lsyrett@indmin.com. 

For in-depth fluorspar and graphite price analysis, please visit the IM Data mineral tracker pages online.

Bold indicates a price change from the previous month (it may have changed more than once during the month). All prices are listed in US$ and quoted per tonne unless indicated.