The kaolin industry has undergone a number of changes in the
past few years as the mineral’s use in paper has
declined to make way for the increased uptake of electronic
devices in developed nations, while kaolin production continues
to undergo ownership consolidation.
According to BASF, the Germany-headquartered chemicals
multinational which produces kaolin products, manufacturers are
facing a number of challenges as changing trends in usage and
low oil prices have impacted consumption.
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Coating and filler pigment for P&B,
2013.
Total 48m tonnes.
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Source: Ian
Wilson
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Several key markets for kaolin are experiencing declining
demand, including graphical paper, ceramic proppants and
refractories," a spokesperson for BASF told
IM.
"The market for graphical paper continues to decline as
e-media becomes ever more popular. Kaolin, whether used as a
filler or as a coating pigment in graphical paper,
accompanies
this decline."
As a result, a number of companies, including BASF, have
decided to move away from producing kaolin for the paper
industry and refocus their attentions in more profitable areas.
Earlier this year, BASF announced that it was offloading its
paper hydrous kaolin (PHK) division to rival kaolin producer,
France-based Imerys SA. The divestment included the
company’s milling facility in Georgia, US, its
patents, brands, customer relationships
and contracts.
While the deal remains subject to approval by the relevant
merger control authorities, BASF told IM that
it now expects the transaction to close during the fourth
quarter of 2015. It added, however, that the sale does not
signal a total move away from the paper business for BASF.
"BASF continues to be a leading global supplier to the paper
industry and offers a wide range of products for paper
manufacturing and coating," the company told
IM.
The restructuring, BASF said, was implemented instead to
focus on key growth markets for kaolin, such as wet-end
chemicals, calcined kaolin for all paper applications and
hydrous kaolin for thermal paper.
According to BASF, non-paper applications tend to expand at
close to GDP levels and these are the areas that are likely to
show key growth in the future, in addition to hydrous and
calcined kaolin for industrial applications as well as kaolin
for process catalysts, although the company will continue to
provide paper end markets with products such as calcined
kaolin.
With the PHK business, Imerys will be adding several hundred
thousand tonnes a year of kaolin production to its existing
capacity, which translates into around €100m ($113m*)
extra revenue. In 2014, Imerys’ kaolin revenue
totalled €480m for the year.
According to UK-based industry consultant Ian Wilson,
BASF’s divestment to Imerys is indicative of
continued industry consolidation in addition to the limited
growth displayed by the paper industry. He is also more
conclusive about what the decision means for
BASF’s involvement in paper chemicals.
"They are keeping their calcined clay division, but Imerys
is very much in the driving seat here," Wilson told
IM. "For BASF though, this does signify a
total move away from paper and this is a very significant
development."
"The important thing here is that consolidation is still
happening," Wilson added.
Paper and packaging
Kaolin, often referred to as China clay, is an almost white
mineral with a fine particle size and dispersion that makes it
ideal for use as a pigment. High quality mineral deposits are
located in the Southeast US, Brazil and the UK.
The paper industry uses kaolin as both a coating to enhance
brightness, smoothness and printability and as a filler to
reduce the need for pulp, which cuts the overall cost of the
finished product.
According to US Geological Survey (USGS) figures, in 2014,
47% of kaolin produced in the US was consumed by the paper
industry, with the remaining 53% accounted for by other uses,
including ceramic proppants for the fracking industry, which
the USGS says have become a significant end market for the
mineral – although this could contract in 2015, in
line with lower
oil prices.
Of the estimated 5.8m tonnes kaolin produced in the US,
approximately 2.6m tonnes were exported for use in paper, as
well as for consumption in ceramics and for use in fillers and
extenders in paint, plastic and rubber products.
The ceramic sector accounts for a large proportion of kaolin
consumption globally. The qualities of kaolin that make it
desirable for use in ceramics are its white colour, gloss and
hardness.
"Kaolin in ceramics remains very important," said Wilson.
"Though most ceramic production takes place in Asia –
who knows? Maybe
ceramics will grow to overtake the paper market," he
speculated.
A greater proportion of kaolin supply is also going into
packaging, which is offsetting some of the decline in demand
from paper markets.
"Growth is still being seen on the packaging side of
things," Wilson told IM. He said that this
trend is being reflected in company structures, with Imerys
forming a new a new "pigments for paper and packaging"
division, to replace its existing "pigments for paper" arm.
Of the total 48m tonnes of coating and filler pigments used
in paper and board (P&B) in 2013, Wilson estimates that
kaolin accounted for 18% of total market share; ground calcium
carbonate (GCC) for 65%; precipitated calcium carbonate (PCC)
for 13%; and talc for the remaining 4%. In terms of a split
between coating and filler materials, kaolin accounted for 24%
of the former and 10% of the latter in 2013.
By the end of 2015, the impact of e-media devices is likely
to show a pronounced effect on the paper industries in mature
markets, with paper declining by 0.6% in North America and 1.7%
in Europe in the period between 2010 and 2015. In contrast,
Wilson forecasts that board and packaging will grow by 1.9% in
Europe, whereas growth of 2.2% is expected in North
America.
In emerging countries, meanwhile, paper is predicted to
exhibit growth of 5.3% in South America and 4.2% in Asia, while
packaging and board is expected to show growth of 4.4% and
7.2%, respectively, between 2010 and 2015.
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Filler pigments used in P&B, 2013.
Total 18.5m tonnes.
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Source: Ian
Wilson
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Construction to drive ceramics
According to industry analysis published by Transparency
Market Research, growth in kaolin demand is expected to be
driven by a rise in the global construction industry. The
research service predicts that the kaolin and metakaolin market
will reach $5.3bn by 2019.
Transparency’s report outlines that the kaolin
market was worth $4bn in 2012 and is expected to register a 4%
compound annual growth rate (CAGR) between 2013 and 2019.
Meanwhile, the global metakaolin market is estimated to
grow at a CAGR rate of 4.4% to $124.2m by
the end of 2019, owing to its use in mortar and concrete
applications.
Metakaolin, a dyhydroxulated form of kaolinite, is obtained
by thermally treating kaolin, and according to Transparency,
its ability to help reduce carbon dioxide emissions makes it a
viable, eco-friendly alternative to traditional materials. With
a global focus on reducing carbon footprints and major
companies opting for sustainable alternatives, this is likely
to drive demand for kaolin in the near future.
On top of increased usage by the construction sector in
building foundations, pavements and architectural structures,
construction growth drives demand for ceramic minerals like
kaolin through the resulting increase in demand for ceramic
sanitary ware and tiles.
The slowdown in China’s economy and knock-on
effect in GDP-linked industries like manufacturing and
construction has been well documented. The general consensus
from industry participants is that, despite a slowdown in its
industrialisation, China is still a growth area for raw
materials. With 215m tonnes sanitary ceramic products exported
in 2014 – accounting for 40% of global export supply
– the country represents a large opportunity for
ceramic minerals, particularly as there is a limited amount of
high-grade kaolin mined in China.
However, the country has faced criticism owing to the lack
of standardisation for raw materials in ceramics, which has led
to quality fluctuations, as low grade kaolin – as well
as montorillonite, diatomite, feldspar and nepheline syenite,
also used in ceramics – cannot be used for the
production of high quality end products. Impurities can result
in colour changes, as well as affecting the chemical stability
of ceramics.
Australian mineral sands producer Iluka Resources Ltd, which
mines zircon used in ceramic glazes, noted the weakening demand
for ceramics in China in its latest set of production results
in October. However, the company added that it managed to
offset the lower consumption from China by supplying increased
demand in Europe and India. India, in particular, is expected
to drive ceramic mineral consumption in the near future, as its
growing middle class and rising quality standards create more
demand for ceramic consumer items.
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Coating pigments used in P&B,
2013.
Total 29.5m tonnes.
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Source: Ian Wilson
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Coatings potential
While kaolin is used in the production of whiteware, adding
necessary plasticity, shrinkage and vitrification properties,
the mineral is also used in ceramic coatings, an industry with
its own significant growth potential, according to a recent
report published by Research and Markets.
The report predicts the sector will pass the $10bn mark by
2020, although this includes coatings based on other minerals
such as titanium dioxide (TiO2) and talc.
Largely attributed to an increase in the ceramic coating of
automotive components, demand growth will also be driven by new
product developments and increased consumption of
plasma-sprayed ceramic coating in semiconductor and liquid
crystal display (LCD) equipment.
While Research and Markets has staked anticipated growth at
a CAGR of 6.75% between 2015 and 2020, ceramic coatings
manufacturer APS Minerals has projected growth of around 5% per
year in demand from the semiconductor industry.
The healthcare industry is additionally expected to fuel the
fastest demand growth for ceramic coatings in the short
term.
The US, the largest market for coatings, is expected to
expand at a rate of 6.73% over the five year period from
2015.
Ceramic proppants
While the USGS notes that the decline in kaolin sales to the
paper industry were balanced in part by increased sales for
ceramic proppants, the agency has yet to issue its 2015
analysis taking into account the downturn in oil and gas
markets.
When oil and gas prices were hovering at historic highs
during the first half of 2014, a number of producers invested
in expanding and launching new ceramic proppant operations.
However, since the market collapsed in mid-2014, with oil
prices of $50/barrel less than half what they were in H1 2015,
and is expected to remain low for the foreseeable future,
companies like BASF and Imerys have been hit hard by the
resultant decline in demand.
Exploration and production (E&P) companies have sought
to cut costs wherever possible, with many firms making a switch
from ceramic proppants to cheaper silica (frac) sand.
Typically composed of bauxite, kaolin or a blend of both,
ceramic proppant manufacturing facilities have had to cut
production or come offline entirely as the current market
environment has rendered them unprofitable.
Imerys saw its energy solutions business revenue shrink by
4.1% in the first half of 2015 as the company conceded a that
there had been a "brutal decline" in ceramic proppant demand
and intimated that it would struggle to maintain its proppant
cost structure when not in production.
The latest casualty of the oil price decline in ceramic
proppants, North American producer Carbo Ceramics, said in
September that it would idle its manufacturing facility in
Millen, Georgia, owing to reduced activity in the oil and gas
market.
Although the company noted that there was increasing
evidence in production data suggesting that "using large
amounts of sand is not the best approach to optimise the frac
when certain reservoir conditions exist", this was the second
ceramics proppant plant it has decided to close in Millen.
*Conversion made October 2015