Lower labour costs and softer environmental regulations in
China are making it harder for European producers of caustic
magnesia (CCM) to compete with their Chinese
Speaking at the IM MagMin 2015 conference in
Athens, Greece, Michael Tsoukatos, director of development at
locally based miner Grecian Magnesite, said
that what has traditionally been a low-margin industry is under
increasing pressure from cheap Chinese material in the
"It is a very competitive market," he said. "Consumers are
always looking for cost reduction opportunities."
CCM is mainly used as an ingredient in animal feed, but has
other speciality applications in markets like water treatment,
construction and automotive.
China has dominated the global magnesia industry for the last
two decades and produced about 4.3m tonnes CCM in 2014, or 73%
of world production, according to figures compiled by the China
Chamber of Commerce of Metals Minerals
and Chemicals Importers and Exporters (CCCMC), quoted by
independent consultant, Ian Wilson.
Reasons for this dominance include China’s
production cost advantages, as well as lower wages. This
position rests on less stringent standards for air quality and
emissions, meaning Chinese companies are not required invest in
more expensive, clean production plants.
European companies with no choice but to comply with
environmental regulations are attempting to circumvent
China’s advantages by offering high quality
material with supply security guarantees at stable
Greece-based Terna Mag, which began
shipping magnesite last year under the Gek Terna group of
companies from former FIMISCO facilities in Euboea Island,
approximately three hours northeast of Athens, has been eager
to showcase its business and establish a global customer
Comprising a mixture of old and new factories, warehouses, a
port, an open pit magnesite mine and a processing facility in
the Mantoudi area of Euboea, Terna Mag has invested in new
calcination equipment, a multiple hearth furnace (MHF) and a
new laboratory to position itself as a modern supplier of CCM
and dead burned magnesia (DBM).
|Terna Mag has invested in new equipment
at its Mantoudi magnesite facility on Euboea Island,
where it has revived the past-producing operations of
FIMISCO (source: Gabriella Kiss).
Following completion of phase one of Terna Mag’s
development plan, the company has the capacity to produce
60,000 tpa CCM.
Phase two, which will see the implementation of a second MHF, a
briquetting unit and shaft kiln for DBM production for a total
capacity 90,000 tpa
CCM and 30,000 tpa DBM, is due to be finished by the end of
This level investment is not being matched by rival magnesia
companies in China, however. Chinese producers will not use the
type of modern equipment employed at Mantoudi because it is
more costly and CCM can be produced relatively simply using
more primitive methods.
Although some large Chinese players did decide to switch to
modern, clean equipment for recently-opened new projects, they
quickly changed back to older, less costly production methods
to preserve budgets when prices came under pressure.
Modern processing technology reduces dust and improves air
quality, but Chinese producers are opting for cheaper, dirtier
production methods while pollution standards remain lax.
Terna Mag’s decision to expand production at a
time when there is already overcapacity in the industry has
raised eyebrows, although some point out that entering a market
when prices are low is a good point at which to invest, as it
encourages the leanest possible project economics.
Emmanouel Tsontakis, general manager for Terna Mag,
acknowledges that the market is challenging. He said that a
third phase of expansion, which would see the company
re-construct a private jetty, install a flotation unit for
upgraded beneficiation and the production of magnesium
hydroxide, is being put on ice until it is clear whether there
is a market need for this additional output.
One China-based market participant said that Chinese
competitors can see that magnesite resources in Greece are
different from those in China in terms of chemical composition
and physical structure, and they know that Greek production
costs are higher.
However, there is a lack of knowledge in China in terms of
grade categorisation and appropriate end markets for different
magnesia products, so Chinese producers are keen to learn from
European companies like Terna Mag and apply this understanding
to their own projects.
China continues to pose a significant competitive threat to
European magnesia producers in the latter’s local
markets, despite Europe’s advantages in terms of
freight cost and quality.
|Despite dominating the industry, Chinese
companies are eager to learn from their European
magnesite competitors to help them understand how to
classify their own material (source: Gabriella
China’s lower production costs and large capacity
give it pricing power that many European suppliers struggle to
match, although recent European Union anti-dumping legislation
on certain magnesia-based products has helped to mitigate the
erosion of magnesia prices in Europe.
According to David Che, CEO of China-based Sinomagchem Co.,
there is a risk that the Chinese government may force all
companies to upgrade to new modern plants and facilities, like
those used in Europe, but it is unclear whether this will be a
blanket policy across the industry.
The government has different standards on for different
companies if some have the right connections and this will be
unfair, Che told IM.
He was also pessimistic about new environmental protection
legislation, as he believes that the government is unlikely to
force the closure of all magnesia producers in China while they
upgrade their equipment because of the loss of tax revenue.
Like other Chinese magnesia producers battling amid the
fiercely competitive, low-priced magnesia industry, Sinomagchem
are trying other ways to make money from magnesia.
It has stopped selling its CCM and is instead using it
internally as a raw material for other, higher value products,
such as magnesium sulphide, for which is now ranks as the
second largest producer in the world, according to
|Terna Mag is hoping to build up its
share of the European CCM and DBM markets (source: