London-listed Sierra Rutile Ltd told
IM on a recent site visit that it expects
titanium dioxide (TiO2) feedstock prices to remain
flat into the first half of 2016, followed by modest rises from
the middle of the year.
Neil Gawthorpe, marketing director at the
company, said that he expects titanium sponge markets to
recover before the welding industry. Following this, he thinks
pigment sector consumption will begin to pick up, leading to a
recovery in rutile pricing.
"We believe that Q3 to Q4 this year will
see the bottom of the rutile market. After this, prices will be
flat, then start moving up in mid-2016," Gawthorpe said, adding
that he was "not expecting any phenomenal things to happen on
pricing until 2017".
Pigment and pigment feedstock producers
alike have been noticeably reticent in
opinions on future mineral sands market conditions and prices
this year, possibly owing to repeated previous predictions made
by analysts and companies of market recoveries, which then
failed to materialise. This eroded confidence in such forecasts
and in the TiO2 business as a whole.
"There was 100 days’ worth of
TiO2 inventory in pigment manufacturer warehouses
– this is now down to 60 days, whereas the normal is
about 40," Gawthorpe said. He told IM that
many premium products are no longer commanding higher prices,
thanks to the current soft market conditions.
Industrial grade rutile, a product offered
by Sierra Rutile that is unsuitable for pigment markets owing
to its lower particle size than regular grade rutile, is used
in flux-cored wire for the welding industry. This material used
to command a 10% pricing premium over pigment grade rutile when
prices were high in 2012, according to Gawthorpe. However,
the current situation is an improvement on the past, when
industrial grade rutile was simply screened and discarded,
He said that today, prices are roughly the
same for both products. Long term pricing damage was also
caused by the market spike of three years ago, Gawthorpe
"Only 20% of applications require
chloride-route pigment, whereas around 60% can use either
chloride or sulphate-route. Chloride material used to get a
premium in every application, but 2012 prices led to
The company also views its rutile, which
it mines from its Lanti dredge mining operation and Lanti dry
mine in southwest Sierra Leone to be a premium product over
rutile sourced from other, coastal deposits.
Lower metal ion impurities relating to its
ore’s river-based genesis, combined with its high
angularity, result in a product that is favoured by consumers
for its potential to create a higher-quality end product with
less waste, according to Gawthope.
Despite the apparent advantages of Sierra
Rutile’s material, the downwards pressure on the
industry means that this is not reflected in its sale value.
"Customers are not willing to pay a premium price for it in the
current market," Gawthorpe told IM.
Sierra Rutile intends to "lock-in" a
significant proportion of its volumes for 2016, but will not
sign any long-term contracts for the moment. "Longer term
contracts can be signed when pricing improves," Gawthorpe
Meanwhile, John Sisay, Sierra
Rutile’s CEO, said that the business can cope with
rutile prices at or even below current levels, whereas the
company’s peers may struggle.
Sierra Rutile believes that the
ramifications of the present market slump could be
far-reaching. It says that, for many pigment manufacturers, the
future viability of the heavy mineral (HM) sector is a concern.
While they currently enjoy low feedstock prices, the effect
that these prices may have on supply beyond the
industry’s immediate horizon is beginning to worry
"One customer in particular said that
they’d like to pay more, because the market
isn’t sustainable in the long term with these
prices," Gawthorpe explained. "But they don’t want
to pay more while their competitors continue to pay [low]
"The pigment industry is putting out fires
everywhere," he added. "They tell us: 'Yes we’re
concerned that three years from now, prices won’t
support capacity expansion, but we don’t have the
time to think about that right now."
For rutile markets to recover fully,
however, the TiO2 industry must also heave itself
out of its depression. As Gawthorpe stresses, pigment is
unlikely to lead a recovery, but will rather lag improvements
in titanium sponge and welding market conditions. This will
then be "further compounded as and when the pigment sector
strengthens," Gawthorpe told IM.
"For TiO2 feedstock markets,
ilmenite stockpiles are a problem," Gawthorpe explained.
"Production and demand are otherwise roughly equal though, due
to a lack of investment brought about by current pricing, a
supply deficit is looming."