Slowing downstream consumption pushes upriver for minerals

By Laura Syrett
Published: Thursday, 28 May 2015

Potash producers secure higher contract prices; TiO2 outlook still offers little cheer for feedstocks; refractory minerals mixed on steel

Waning demand from major industrial mineral-consuming segments such as paints, plastics and refractories is filtering back to raw materials suppliers with increasing clout.


Fluorochemicals, pigments and carbon materials used in steel production have been among the hardest hit, with participants in these industries telling IM that even with inventories running down, the anticipated subsequent pickup in demand has so far been slow to materialise. 

Overcapacity remains a major concern for upstream mineral producers. Rather than shutting down production altogether, many facilities have simply been idled, ready to restart when consumption levels increase.

However, many are now facing the prospect of permanent closure, particularly in the titanium dioxide (TiO2), fluorspar and antimony sectors. Although this is glumly accepted as a healthy necessity for many industries, the situation has created a stalemate as businesses hope that their competitors will be the first to fold up capacity for good.

In the graphite industry, non-Chinese producers, worried about the sliding prices, may take some comfort from the pressure being exerted on China’s domestic industry, which is facing increasingly strict pollution controls and government demands to make higher value material, leaving some plants unviable or illegal.

Currency fluctuations have also had a significant impact on mineral businesses in recent months, skewing some quarterly earnings results for better or worse, while oil prices are benefitting some producers’ costs at the expense of profits in the oilfield minerals sector.

Agriminerals

Potash

The Belarusian Potash Co. (BPC) has signed a $1.3bn memorandum of understanding (MoU) to supply  potash to China over a five year period.

Inked in the first half of May, the contract between BPC and China’s Sinochem Fertilizer Macao Commercial Offshore Ltd (Sinofert) will see 4m tonnes Belarussian potash delivered between May 2015 and 2019.

BPC said that the contract included both firm and optional volumes of potash, while the exact price in the contract is subject to further discussion.

The agreement followed an earlier deal signed between North American fertiliser marketing company Canpotex Ltd and Indian customers, finalising annual potash supply contracts totalling 1.3m tonnes at higher year-on-year (y-o-y) prices.

Per tonne pricing was $10/tonne higher than in 2014, bringing the new contract price to $332/tonne, which will remain in place until the end of March 2016.

Market commentary

The meteorological phenomenon El Nino is set to return this year, it was confirmed in mid-May, with experts warning that the extreme weather events associated with the Pacific warming phase could push up some commodity prices.

The Australian Bureau of Meteorology reported that a "moderate to strong" El Nino is emerging, five years after the last in 2009-10, which saw droughts and floods in different regions damage crop production and sent the price of agricultural commodities soaring.

According to a report by the Financial Times (FT), wheat, rice, sugar, coffee and cocoa are all vulnerable to the impacts of El Nino, as well as rubber, palm oil, dairy products and anchovies.

The news could provide a boost for fertiliser mineral suppliers if farmers need to bump up production to compensate for lost crops this year.

Chemical minerals continue to suffer

Antimony

The closure of antimony smelters in Lengshuijiang, China, buoyed the antimony ingot market and maintained prices at slightly stronger levels in the first half of May, according to local sources.

Lengshuijiang is the main producer of exported antimony in China, shipping around 3,000 tpm, or 80% of Chinese overseas ingot sales, most of which is exported through Vietnam.

The government of Lengshuijiang instructed the smelters to stop production from 1 April to tackle pollution in the area, with the intention of allowing the group to reform as a company with managed output.

IM’s prices for trioxide grade antimony ingot (99.65% min Sb2O3) stand at $7,750-7,850/tonne on an FOB China basis and CIF Rotterdam basis.

Prices for antimony trioxide (typically 99.5% Sb2O3) stand at $6,900-7,050/tonne CIF Antwerp Rotterdam (5-tonne lots) and at $6,900-7,000/tonne FOB China (20-tonne lots). 

Bromine

One of Asia’s largest producers of bromine chemicals, Gulf Resources Inc., said in April that the increase in list prices put forward in recent months by US producer Albemarle Corp. and Israel Chemicals Ltd (ICL) for Asian markets is likely to boost bromine prices in China.

"The significant price increases by the two largest companies in the bromine industry will have a positive effect on the Chinese domestic bromine market," Xiaobin Liu, CEO of New York-listed Gulf, commented.

"It is difficult to predict when these price increases will be fully reflected in China. However, we believe when customers work through their current inventories, we will see significant increases in prices."

IM’s prices for bromine (purified, bulk, 99.95% Br, domestic destination, tonne lot, ex-works US) stand at $1.6-1.75/lb ($3.52-3.85/kg).

Fluorspar

Acid-grade fluorspar (acidspar) prices fell by an average of 33% in Q1 2015 from the peaks of 2011, leaving some prices at their lowest levels in the last two-and-a-half years. 

The price of acidspar, 97% CaF2, dry filtercake, FOB Durban, started last year at around $415/tonne, however, further declines in February, May and October have now left prices rooted at $315/tonne.

Market commentary

In China’s antimony industry, since production was halted in Lengshuijiang, the price of antimony ingot has risen slightly and is now steady at higher levels, clo-se to the top of IM’s published ranges.

The government has yet to announce a date for the reopening of the smelters, but some market commentators believe the plants could be closed for six months.

Demand for antimony ingot and antimony trioxide remains weak, meanwhile, with no significant upturn predicted in the near future.

For bromine, Liu’s comments hint at resistance to higher prices by Asian customers, as recently remarked by both Albemarle and local US rival, Chemtura Corp. As well as price rises for elemental bromine, companies have sought to introduce higher priced flame retardant chemicals into Asian markets as they manufacture new regulation-compliant brominated products for consumer and industrial goods.

While there remains a plentiful supply of bromine, buyers in lower-cost regions like Asia are reluctant to pay more for the products.

Liu said that efforts by the Chinese government to boost the country’s economy could increase demand for bromine, which is linked to construction and consumer markets through its use in insulation foams, textiles and plastics.

With respect to fluorspar, the ongoing downturn in fluorochemical demand, owing to changing legislation and overcapacity in China, has had a considerable impact on acidspar markets owing to the material’s application as a feedstock in hydrofluoric (HF) acid production. This slump has caused Chinese and European prices to fall by as much as 46% since 2012.

Prices fell continuously throughout H2 2014 following on from a disappointing first-half of 2014. 

Mineral sands: pigment price push

TiO2

Efforts by suppliers of TiO2 to raise list prices for the pigment are not trickling down to producers of mineral sands feedstocks.

Market reports at the end of April suggested that Asian exports of TiO2 were available for $1,900-2,000/tonne FOB China and could rise by $50/tonne for deliveries in May.

Reports suggested that non-Chinese producers were offering heavily discounted cargoes of chloride route TiO2 to buyers in Asia-Pacific in an attempt to recapture market share from Chinese producers.

Prices were rumoured to be $2,300-2,600/tonne CFR Asia for Q2, which is around $50-100/tonne lower than prices paid in Q1 this year.

Ilmenite, rutile and leucoxene prices remain weak, however. IM’s prices for ilmenite (bulk concentrates, min 54% TiO2, CIF China) stand at $100-120/tonne.

Rutile prices (concentrate, min 95% TiO2, bulk, CIF China) currently stand at $810-850/tonne, according to the IM Prices Database.

Leucoxene prices (min 91% TiO2, max 1% ZrO2, bagged, FOB West Australia) stand at $700-800/tonne.

Zircon

Zircon prices remained steady in May, with traders reporting scant business in the market.

IM’s prices for premium grade zircon (66.5% min ZrO2, bulk) stand at $1,050-1,150/tonne FOB Australia; $1,050-1,450/tonne FOB US; and $1,050-1,150/tonne CIF China.

Standard grade zircon prices  (min 65.5% ZrO2, bulk) are $1,000-1,050/tonne FOB Australia; $960-1,150/tonne FOB US; and $1,080-1,100/tonne CIF China.

Market commentary

In the TiO2 market, it was suggested that European and North American pigment suppliers are undercutting these price levels, however IM sources said the producers in these regions remain concerned about the arrival of competitively priced Asian TiO2 on the global market (see p12).

Market participants added that Europe and US-based pigment companies have indicated that
they do not expect significant
demand recovery this year and that they are not anticipating having to pay more for ilmenite, rutile and leucoxene feedstocks as a result.

At the end of April, Anglo-Australian miner Rio Tinto said it had cut its TiO2 output by 17% to 322,000 tonnes in the first quarter of this year in response to weak market conditions, while US TiO2 producer Huntsman Corp. confirmed that global prices for the pigment remain low and that demand is still under pressure.

The company reported a 90% y-o-y fall in income to $5m in the first quarter of 2015 as business conditions remained challenging.

Average selling prices decreased owing to the impact of a stronger US dollar against major European currencies coupled with high titanium inventory levels, Huntsman said.

IM sources said that demand for pigments is flat at present and that TiO2 manufacturers are putting pressure on ilmenite and rutile feedstock suppliers in an effort to preserve their own margins.

For zircon, some market participants said that there could be a shortage of zircon in the market within the next five years, assuming demand remains steady.

Others dismissed this idea, however, saying that although prices are expected to remain stable for the foreseeable future, with the substitution trend having levelled out, scarcity is unlikely to be a factor in the industry.

Refractory minerals – rough with the smooth

Graphite

High purity (94-97% C) flake gra-phite prices have fallen by over $200/tonne since January 2015, while low purity (85-87% C) flake graphite prices dropped by nearly 20% in Q1 2015 as the threat of excess supply and poor demand were compounded by currency fluctuations.

The average price of European flake graphite grades, which had already fallen by almost 13.5% since the start of the year, fell by a further 12% in April, dragging prices yet closer to those of Chinese grades, which were down by 17.5%.

The prices of larger mesh grades have also fallen. The price of +80 mesh flake (94-97% C, FCL, CIF Europe) dropped to between $1,050-1,150/tonne from $1,250/tonne at the beginning of January 2015.

Olivine

Prices for refractory-grade olivine have remained within IM’s cur-rent ranges, even though its main end market, refractories, is under pressure from falling consumption.

Industry sources in Europe confirmed to IM that refractory-grade olivine (bulk) is currently priced at €80-130/tonne ($89-145/tonne*).

Prices for olivine in the US (refractory grade, bulk, US, ex-plant/mine) are within the $80-150/range.

Market commentary

The decreases across the flake graphite market follow a brief period of stability as activity slowed throughout Q4 2014.

An upturn in production seen following the Chinese New Year, accompanied by low demand and the fall in the value of the euro against the US dollar has, however, pushed global prices down further as producers prepare for a minor recovery in sales over the coming months.

IM sources indicated that sellers offering material priced in euros had to bear the brunt of the fall in the currency devaluation, which severely impacted their profit margins.

There are a few signs of recovery in demand from the refractory sector, owing to a slight rebound in the US steel market, suggesting an upturn is on the horizon. However, some IM sources have suggested that this is unlikely to feed through to the graphite industry before late Q4 2015.

Excess supply pressures have been a greater burden across finer mesh grades, which in certain cases have fallen to as low as $500/tonne for flake (90% C, -100 mesh, FOB China).

For olivine, the largest end market is in slag conditioners and stabilisers within blast and electric arc furnaces (EAFs) in the steel industry.

According to recent reports, EAF activity is currently weak owing to slowing global steel production. US-based carbon materials producer GrafTech International, which makes synthetic graphite electrodes for the steel indus-
try, blamed its $55.6m first quarter loss on soft demand from EAFs.

However, Brazil-based Magnesita Refratarios recently cited demand for steel recycling, which also employs EAFs, as an area
of demand growth in the near future.

Other uses for olivine include foundry sands and abrasives, where demand is broadly reported to be flat at present.

Producers of the mineral told IM that they did not foresee any sudden changes in demand this year.

*Conversions made May 2015

Full information on all IM’s prices can be found on the IM Prices Database online at www.indmin.com/pricesdatabase.