Summer torpor hits industrial minerals early

By Laura Syrett
Published: Wednesday, 22 July 2015

Positive barite, bromine, soda ash prices stand out; refractory minerals continue to head south; TiO2 feedstocks face gloomy second half of 2015.

Specialist mining bank Investec commented in early July that mining is "going nowhere and nowhere fast", pointing to continuing volatility in commodity prices and unpredictable foreign exchange rates, against a background of macroeconomic challenges, that it said were keeping the sector down.

Investec highlighted weaker than expected US growth and the increasing likelihood of a Grexit from the Single European Currency (euro), plus the fact that economic stimulus measures in China have failed to boost commodity consumption.

While headline commodities, including iron ore, coal and oil, are regarded as being among the most vulnerable to macro trends, niche markets are also feeling the squeeze.

The summer months are traditionally slower for business in a number of sectors, but with weak trading already characterising much of the industrial minerals industry, even the slight winding down in commercial activity that became evident towards the end of June was having a disproportionate impact on mineral prices.

There was some positivity for both chemical and drilling grade barite (barytes), bromine and soda ash, but the situation continues to look bleak for refractory minerals, including magnesia and graphite. Fluorspar, titanium pigment minerals and rare earths are also continuing to buckle under overcapacity and poor demand.

Agriminerals

Potash

Tel Aviv, Israel-based Israel Chemicals Ltd (ICL) inked a contract with customers in India at the end of June to supply 835,000 tonnes potash, including options.

Spot prices for potash (standard grade) are reported to be around $300-310/tonne.

Market commentary

Echoing other recent deals in the potash industry, ICL will see the distributors pay $10/tonne more for the potash than the equivalent contracts stipulated last year.

"[The Indian potash market] is expected to be a leading driver of worldwide potash demand for years to come," the CEO of ICL subsidiary ICL Fertilizers, Nissim Adar, said.

Chemical minerals: Up and down

Barite

Prices for paint grade barite have managed to skip the negative pressure affecting drilling grade material to shift upwards slightly in recent weeks.

Prices for chemical grade barite (Chinese, CIF Gulf Coast) have narrowed upwards to $170-180/tonne, from $161-180/tonne.

Meanwhile, prices at the lower end of the range for white, ground paint grade barite (96-98% BaSO4, 325-350 mesh, 1-5 lots, ex-works US), have moved up to $325-400/s.ton from $315-400/s.ton.

Bromine

The price of bromine has fluctuated by as much as 10% since the beginning of this year, forcing downstream producers of brominated products to introduce their own price increases.

Domestic Chinese prices for bromine rose as high as Chinese renminbi (Rmb) 19,670/tonne ($3,172/tonne*) in May, up from Rmb 17,775/tonne ($2,868/tonne) at the end of January, but have since settled back to around Rmb 18,741/tonne ($3,023/tonne).

Sources said that selling values for elemental bromine were still in line with IM’s published ranges. These stand at $1.6-1.75/lb ($3.52-3.85/kg) for 99.95% Br material (bulk) on an ex-works US basis and $1.6-1.8/lb ($3.52-3.96/kg) CIF Europe.

Fluorspar

Acid grade fluorspar (acidspar) prices are likely to remain weak for most of 2015, as new capacity pushes up production levels in an already sluggish market – intensifying competition in the sector as producers try to sell mounting stockpiles at narrowing margins.

Chinese prices have fluctuated around the $280/tonne mark for a number of weeks, with average FOB prices for 97% CaF2 material remaining above $300/tonne elsewhere.

Today, the price for acidspar, 97% CaF2, dry filtercake, from China to India is at $290/tonne, although sources told IM that shipments at the rate of $275/tonne on CFR India basis have been offered by other suppliers in the region.

Soda ash

Vertically integrated chemicals producer Tronox Ltd is to increase its list and off-list soda ash prices by $12/s.ton from 1 September, covering both bulk and packaged products.

Tronox gave its new list prices for bulk soda ash (FOB Westvaco or Granger, Wyoming) as $302/s.ton for dense material; $322/s.ton for its trademarked Grade 100 product; and $332/s.ton for its Absorpta Plus line of soda ash.

Prices for packaged soda ash (FOB Westvaco, Wyoming) now stand at $367/s.ton for 50lb and $357/s.ton for 2,000lb of dense material and at $387/s.ton for 50lb and $377/s.ton for 2,000lb of Grade 100 product.

The company said that Tronox Alkali’s energy surcharge and freight policies for soda ash will remain in effect, with the surcharge base cost set at $7/million British Thermal Units (MMBtu).

Market commentary

Chemical barite industry sources in North America told IM that the market has remained strong so far this year. "No price concessions have been made," one source said.

A barite supplier that ships chemical grade barite from China to the US said that buyers are pressing for price reductions but that sellers are standing firm in order to preserve margins for non-oilfield products as drilling grades come under threat.

Sources said that the value of this material had been driven up by higher prices for Chinese shipments of the same grade. "White barite prices have seen a net increase based on an average of all shipments FOB China," one market participant told IM.

In bromine, back in April this year, leading Chinese bromine producer Gulf Resources mooted the possibility of a rising price trend for the chemical in China, pointing to recent increases by rivals US-based Albemarle Corp. and ICL.

Prices for bromine have been under pressure for the last two years, particularly in Asia, as demand from its main-consuming market, the flame retardants industry, has slackened in line with weaker manufacturing activity.

At the beginning of July, US-headquartered AOC Resins, which manufactures flame retardant compounds, announced it was increasing the price of all brominated fire retardant resins by $0.06-0.11/lb ($0.13-0.24/kg).

"The action is due to recent sharp increases in bromine and brominated raw materials [prices]," AOC said.

Market sources told IM that the bromine market was "improving", although gains were limited to recouping some of the pricing ground lost over the last year.

Meanwhile, in fluorspar, the softening prices for Chinese acidspar material have been triggered by an increasing amount of product on the market from emerging suppliers in Southeast Asia, pitching acidspar at comparatively lower prices and jeopardising the market share of existing producers.

This comes on top of bearish fluorochemicals demand, with the majority of fluorocarbons registering an average drop of 4-7% year-on-year (y-o-y) compared to 2013 figures.

While some industry sources have suggested that prices have slightly improved above current ranges, the extent of these increases remains unclear. 

If demand fails to pick up in the current oversupply situation, any upturn in prices is unlikely entering H2 2015.

For soda ash, Tronox did not give any reason for the increase in its prices, but it is likely that the company is taking advantage of strong demand for the glass and detergent-making mineral.

Industry sources have reported that the sector was robust in H1 2015, with consumption expected to stay on a mildly positive trend throughout the rest of this year.

Contract prices for soda ash in the US are typically decided on a 12 month calendar basis, meaning that Tronox’s revised list prices are likely to remain in force until the end of Q2 2016, notwithstanding any sudden changes in market conditions.

Energy minerals

Rare earths

China’s Ganzhou Rare Earth Association cut its guide prices for ion-absorption (heavy) rare earths concentrate for the first half of July, citing the impact of higher resource taxes on medium and heavy rare earths.

The reduction in guide prices follows three consecutive increases throughout May and June and has taken the wind out of the sails of many industry observers who had suggested that demand for heavy elements, including europium and dysprosium, was bucking the downward trend in light rare earths.

IM’s prices for rare earths (all of which are min 99% grade on a bulk, FOB China basis) stand at: $2.1-2.5/kg for cerium oxide; $240-255/kg for dysprosium oxide; $220-250/kg for europium oxide; $2.1-2.5/kg for lanthanum oxide; $43-48/kg for neodymium oxide; $43-49/kg for praseodymium oxide; and $2.5-3.5/kg for samarium oxide.

Market commentary

According to feedback from sources, which was backed up by reports by Chinese media outlets, prices for neodymium metal reached a five-year low at the beginning of July, with values reported to be $55-62/kg for min 99% material on an FOB China basis.

Sources blamed weak demand from the neodymium-iron-boron (NdFeB) magnet industry for the market trough and said that government rhetoric about rapid growth of the NdFeB sector is overstated. "The market is expanding, but not enough to take all of  the backlog of neodymium as well as new supply," one China-based source told IM. NdFeB is a high strength permanent magnet material used in technologies such as wind turbine generators.

In other parts of the rare earths market, importers of Chinese rare earths are reported to be drawing on existing inventories of material rather than buying in new supply and there is little incentive to build up new stockpiles as many believe that prices will go down further.

Price declines in China have not wholly fed through into export markets, however, with prices in Rotterdam warehouses showing a softer decline than Chinese export prices over the last month.

Mineral sands mired in gloom

TiO2

Titanium dioxide (TiO2) prices in China are likely to stagnate or even decline during the third quarter of this year, due to weak domestic demand, according to the latest industry forecast by China Chemicals Market (CCM).

TiO2 prices have been rising in China in recent months, with rutile TiO2 prices rising 4.8% between March and the end of May and anatase TiO2 prices increasing 6% over the same period.

However, according to CCM, these price rises may be unsustainable. An underlying lack of demand for TiO2 in China’s domestic market will drag prices back down during the second half of the year.

IM’s prices for TiO2 pigment (high quality, bulk), stand at $2,400-2,800/tonne CFR Asia.

Market commentary

CCM pointed out that the recent recovery in TiO2 prices in China has been driven by two factors – a slowdown in production during late-2014 and early-2015 and opportunistic price rises by some producers.

"Several small-scale TiO2 producers in Guizhou and Sichuan suspended production when prices were at their lowest, which gave producers a bit more control over prices. And several producers took the opportunity to raise prices after the end of the Spring Festival holidays and the announcement of the Henan Billions-Lomon merger," CCM said.

"However, there has been no noticeable increase in demand this year and several distributors (…) have admitted being unable to raise their TiO2 prices any further when negotiating with downstream companies. This indicates that China is still very much a buyer’s market, and further price rises are unlikely." 

CCM’s said that its research of downstream markets suggests that the demand situation is unlikely to improve in the short term.

A slowdown in China’s real estate market, where the total area of new housing projects under construction was down 17% y-o-y during the period from January to April 2015, is having a negative effect on the coatings market, which is by far the largest downstream market for TiO2.

Chinese coatings output was down 5% y-o-y in April and this is exacerbating already severe overcapacity problems in the industry. As a result, many coatings producers are struggling to turn a profit and are likely to put TiO2 suppliers under pressure to reduce prices.

Things are not looking much better in the plastics market, which is the second largest consumer of TiO2 in China. Though the plastics industry was recovering strongly thanks to rising global oil prices between January and April, this encouraged many producers to resume production, pushing the market back into oversupply. 

Conditions are even worse in China’s papermaking industry, the third major downstream consumer of TiO2, where manufacturers are struggling with high production costs, high inventories and a host of other problems. According to sources in the industry, sales have been poor this year, even during March and April, which is traditionally the season when demand is strongest.

Oilfield minerals – clinging on

Barite

Despite the revision of bid prices by India’s Andhra Pradesh Mineral Corp. (APMDC) in its barite tender in May this year, Indian exporters are struggling to sell material to regular markets as they fail to compete with Chinese and Moroccan supplies.

Sources told IM that the latest bid prices established by APMDC at levels of Indian rupee (INR) 6,050/tonne ($95/tonne), for specific gravity (SG) SG 4.2 material (Grade A), remains high against low-cost supply from China.

This has disrupted the market for Indian exporters aiming to sell material into Middle East, one of the largest buyers of drilling grade barite from the country.

According to sources, the price of products being sold into the Middle East on a CIF basis is currently hovering around $150/tonne for Grade A material, while Indian quotes are exceeding this benchmark once freight, insurance and packaging costs are included, squeezing margins.

IM learned from sources that in order to compete in prevailing market conditions, Indian barite miners either need to reduce production volumes or revise prices down further to the INR 4,500/tonne ($71/tonne) mark.

Market commentary

The absence of Indian barite from the market in the first half of 2015, while the government and domestic suppliers wrangled over the terms of the mining and export tender, proved to be detrimental to Indian exporters, as buyers managed to secure alternative bargain supplies from other significant players.

Production remains in full swing in the Mangampeta mines of the Kadapa district in Andhra Pradesh, however, despite overcapacity and low consumption rates in oilfield drilling globally.

The tender for 400,000 tonnes crude drilling grade barite, comprising 300,000 tonnes SG 4.2 material and 100,000 SG 4.1 material, was concluded in May this year.

The contracts went to a handful of locally-based bidders, with no international companies contending for allocations, even though the auction was open to foreign buyers.

Among the successful bidders for SG 4.2 barite were Ashapura Group, Oren Hydrocarbons and Trimex, while IBC Ltd, successfully bid for 50,000 tonnes SG 4.1 material for a period of six months.

India aside, drilling grade barite has so far confounded expectations of a downturn in prices as a result of softness in the oil and gas industry – but sources conceded that selling values are coming under strain.

More than 90% of the barite mined globally goes into the oilfield market, leaving the industry highly exposed to volatility in oil prices.

Oil prices currently stand at around $60/barrel, having posted slight gains in June.

Refractory minerals – thin business

Graphite

Flake graphite prices have dropped by as much as 32% since the first quarter of this year, as sluggish demand in European markets and overcapacity in Chinese refractories failed to generate a recovery in demand, according to data compiled by IM.

Grades of -100 mesh and fines experienced modest demand and slightly improved prices in the winter months, however, this recovery was scuppered by an increase in supply from China.

Larger mesh grades, including +100 and +80 mesh flakes, felt downwards pricing pressure as the industrial markets they serve continue to see slow demand, particularly for producers in Shandong province that ship out of Qingdao port.

While no significant trend has been observed in graphite prices since May, export prices from China were down by $20-30/tonne in June, bearing the brunt of weak demand in consumer-driven markets.

Flake graphite prices declined by Rmb 100/tonne ($16.30/tonne) in June, following a reduction of Rmb 200/tonne ($32.60/tonne) in May in the domestic market, which further affected the prices of magnesia carbon bricks and alumina magnesia carbon bricks.

IM assesses flake graphite prices for 94-97% C (FOB Qingdao), +80 mesh, to be around $900/tonne after dropping from the highs of $1,050/tonne seen at the beginning of the year. The price of +100 mesh to -80 mesh, 94-97% C (FOB Qingdao) is $750/tonne, while -100 mesh, for the same carbon content, stands at $650/tonne (FOB Qingdao).

Magnesia

Weak business in the Chinese fused magnesia (FM) market has put pressure on prices, although most suppliers have managed to retain offers at steady levels, sources told IM.

Prices for FM (97% MgO, lump, FOB China) are reported to be within IM’s currently published range of $530-590/tonne. Sources said that some suppliers had been able to firm up prices at the lower end of this range, with a narrower price spread of $550-560/tonne (FOB China) covering the bulk of trades in mid-June.

Deals are still being negotiated at $530-550/tonne for larger orders, however, as many producers are holding significant amounts of material in stock and are keen to reduce inventory.

According to the latest export data from Chinese customs, the volume of FM exported from China between 15 April and 15 May 2015 was 35% lower than the same period in 2014, at 25,204 tonnes compared to 38,792 tonnes last year.

The value of the exports was down by 37.4% y-o-y, the figures showed, at Rmb 14.66m ($2.35m), compared to Rmb 23.43m ($3.77m) for the same month in 2014.

For deadburned magnesia (DBM), weak global trading activity had left prices unmoved between May and June, sources in the industry told IM.

According to figures quoted by industry observers at the IM MagMin 2015 conference in Athens, Greece, in May, China exported 663,000 tonnes DBM last year, up 39% on 2013.

The latest export data from China showed that China shipped 55,298 tonnes DBM between mid-April and mid-May this year, up 72% on the previous month and an increase of more than 10% over the 2014. The total value of exports was Rmb 16.18m ($2.6m), flat with the same period last year, while the average export price was reported at $293/tonne.

IM’s prices for DBM, 90% MgO currently stand at $220-250/tonne, FOB China. Ex-works Chinese prices for this grade are reported to be around Rmb 780-820/tonne ($125-132/tonne).

Prices for 92% MgO material are $250-270/tonne, FOB China, according to the IM Prices Database, while 94-95% MgO DBM is priced at $290-310/tonne.

IM’s prices for 97.5% MgO DBM stand at $370-400/tonne. Ex-works Chinese prices for 97% min MgO material are reported to be in the Rmb 1,450-1,550/tonne ($233-249/tonne) range.

Market commentary

The slowdown in the graphite
sector has triggered a price war amongst suppliers over market share, especially for medium and finer mesh material.

In order to secure regular cash flow, Chinese producers have tried to penetrate the market with low-price levels, which has had a knock-on-effect on similar grades elsewhere in the world, particularly material imported into Europe.

China’s flake graphite mining industry has faced rising environmental restrictions since H2 2014, which has caused output from many producers to become intermittent, especially in Shandong and Pingdu. Sources told IM that some producers have moved to Heilongjiang to open factories in order to avoid stricter environmental standards.

This created a more competitive environment, which has been further compounded by drop in the value of euro against the US dollar, the impact of which is being reflected in the latest prices.

IM has also discovered that some flake producers are selling at below cost just to retain their customers, as market participants foresee prices going down further as a result of the weak Chinese refractories market and thin European demand.

Volatility in graphite prices is likely to prevail in Q3 2015 and many in the Chinese market expect this year will be worse than 2014.

For magnesia, market participants said that the softer conditions could be explained by a seasonal slowdown in industrial activity for the summer, but others pointed out that trading has been scant for a number of weeks.

Local media reports in China suggested that some companies had halted production towards the end of H1, while others were getting ready to reduce prices ahead of bidding for a second half-yearly quota allocation of FM.

IM learned that attempts to rationalise the Chinese magnesia industry and cut the number of producers in an effort to prevent price wars is having limited success, while smuggling remains a problem and creates a two-tier pricing situation.

Non-Chinese DBM producers have blamed the flood of Chinese material onto the market for the decline in prices over the last two years, with falls of around 30% reported since 2013 for some grades.

*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.