Year-end promises few celebrations for mineral suppliers

By Laura Syrett
Published: Friday, 27 November 2015

Barite prices expected to fall further as fluorspar and graphite face negative revisions. Meanwhile, lithium prices continue to rise in China.

The industrial minerals market was lacking festive cheer as the industry approached December, with forecasts for yet another tough year in 2016 setting the tone for most sectors.

The stubbornly weak oilfield market looks likely to force a reduction in barite (barytes) prices sooner rather than later and both graphite and fluorspar prices could come down further before the end of the year.

Stable markets like calcium carbonate have been subject to their customary round of increases while soda ash contract negotiations in the US have resulted in only slight gains for next year.

More positively, lithium prices have increased again in China and it looks as though the rare earths market may be in for some product-specific turnarounds.

Barite

India’s Andhra Pradesh Mining Development Corp. (APMDC) is gearing up to launch a new tender for barite mining and exports, as the initial six month tenure of the last round of auctions drew to a close on 30 November.

After fumbling an initial attempt to sell off mineral rights at the end of April this year, Hyderabad-based APMDC successfully concluded the tender to mine and ship barite in the southeast Indian state at the end of May. 

Speaking to IM in November, APMDC’s general manager, Sri Ramakrisna, hinted that the next round of contracts would be for a period of one year but declined to comment on the floor price of the tender. He admitted that the barite industry is facing tough market conditions in light of stagnating oil prices and declining production of crude oil.

The forthcoming bidding round is expected to make barite available on an FOB basis from three Indian ports to attract international bidders. Bidding in the last auction was based on ex-mine prices.

None of the successful bidders which participated in the latest tender were prepared to comment publicly on what they considered to be appropriate benchmarks for barite in the next auction, but most confessed to IM privately that there should be a downward revision of around 12-15% in prices.

Barite suppliers to European oilfield markets have said they expect prices for the drilling mineral to fall further in the coming months, in line with shrinking rig counts.

"The messages within the oilfield industry are still not too good (…) they expect the current low prices of oil will last for an even longer period than initially expected," one source told IM.

IM’s prices for Indian barite stand at $158-171/tonne (API, lump, CIF Gulf Coast); $120-130/tonne (drilling grade, OCMA/API, bulk, SG 4.2, FOB Chennai); $158-175/tonne (API, ground, big bags, 1.5 tonnes, FOB Chennai); and $110-125/tonne (drilling grade, underground lump, OCMA/API, bulk, SG 4.1, FOB Chennai).

Calcium carbonate

Huber Carbonates LLC is to up its prices for industrial ground calcium carbonate (GCC) by an average of 5-10% from December 2015, or as contracts allow.

The company, a subsidiary of JM Huber Corp., said that while it continues to "focus on minimising the inflationary impact" on its ground calcium carbonate business, cost increases in materials, packaging, freight, regulatory compliance, labour and capital investments had led it to raise prices.

IM’s prices for GCC currently stand at $27-30/s.ton (50-22microns, FOB US), $56-116/s.ton (22-10 microns, FOB US), $188-205/s.ton (3 microns (untreated), FOB US), $300-441/s.ton (stearate coated, 1.1-0.7 microns, FOB US) and $220-320/s.ton (1.1-0.7 microns (untreated), FOB US).

Fluorspar

Fluorspar prices have been trading at the lower end of IM’s ranges in November, as a result of Chinese suppliers reaching the market with new low-priced offers as they aim to clear stockpiles ahead of winter mine closures.

Stagnant demand conditions are expected to continue over the coming months, while supply shows no signs of letting up.

Industry sources confirmed to IM that very few suppliers have been able to secure contracts at the higher ends of published price ranges, while most have been forced to lower offers by around 10% for the coming year.

Consumption levels in the acid grade fluorspar (acidspar) market remain depressed as sales struggle in the major markets of Europe and the US, while trades into India – one of the few areas of growth in 2015 – have also stabilised.

Producers have continued to settle longer-term contracts for 2015, however widespread excess supply is giving consumers leverage in negotiations.

The price of acidspar (97% CaF2, wet filtercake, CIF, Rotterdam) is currently between $270 and $300/tonne, 13% down from January 2015, with some sources reporting deals below these levels.

Meanwhile Chinese acidspar prices (97% CaF2, wet filtercake, FOB, China) continue to fluctuate around the $260/tonne mark, however some Chinese producers have been willing to offer significant discounts, reportedly doing deals at levels as low as $220/tonne, IM understands.

In the metallurgical grade fluorspar (metspar) sector, consumption levels are similarly stable with few signs of growth in industrial end markets.

The price of metspar (min 85% CaF2, CIF) from China to Europe is currently between $290 and $310/tonne.

Graphite

Prices for natural graphite are likely to face further downwards pressure in the near future, as China’s dominance over the finer mesh flake graphite market, coupled with stagnant demand, weigh on the industry.

Graphite trading levels are presently stable, but an abundance of finer mesh material from China and low-cost flake from Madagascar and Russia have caused variations in the value of products with similar purities.

Sources told IM at the beginning of November that price drops across larger mesh products have been reported out of China and into Europe, however the value of lower purity grades has fallen more than higher purity on the whole.

Downward pricing pressure is being compounded by exceptionally low offers from some Chinese players, who are reported to be evading industry taxes by failing to produce invoices or mislabelling products in order to secure regular cash flow.

Growing pressure to reduce these already low offers is likely to widen flake graphite price ranges from China. Today, the average price of flake graphite (94-97% C, +80 Mesh, FOB, Qingdao, China) stands at $900/tonne, however industry sources have begun to report prices below these levels.

In the amorphous graphite market, the more rigid nature of supply has seen prices stagnate in the face of ongoing weak demand levels. Price levels have been relatively stable for much of H2 2015 and although production is likely to slow approaching winter, sufficient supplies remain to prevent this causing significant upward price movements.

Iodine 

Sociedad Quimica y Minera (SQM) said in mid-November that iodine prices had fallen further in the third quarter of 2015 to just below $28/kg.

While volumes were up by around 4% to almost 7,000 tonnes for the nine months to the end of September, the company said that a drop off in revenue was due to the fall in iodine prices, which are now 25% lower than they were a year ago.

SQM expects market growth of 3% for 2015 compared to 2014, with demand boosted by X-ray contrast media and liquid crystal display (LCD) televisions as well as the Asian plastics industry.

The company’s iodine segment accounted for $60.1m of total revenues, 24.6% below sales of $79.8m in Q3 2014.

IM’s iodine prices (crystal, 99.5% min, drums) stand at $27.5-32/kg on both spot and contract bases.

Lithium

Chinese producer Jiangxi Ganfeng Lithium Co. Ltd increased the price of its lithium carbonate twice in October, with a second revision at the end of the month increasing the sale value of its material by nearly 17%, from Chinese renminbi (Rmb) 60,000/tonne ($9,470/tonne*) to Rmb 70,000/tonne ($11,049/tonne). Ganfeng had implemented an earlier increase from Rmb 55,000/tonne ($8,681/tonne) in mid-October. The latest increase means prices are now around 67% higher than they were at the start of this year, when Ganfeng’s lithium carbonate cost around Rmb 42,000/tonne ($6,629/tonne).

Following Gangfeng’s lead, local rivals Sichuan Xingsheng Lithium Industry Co. Ltd and Sichuan State Lithium Material Co. also raised their prices to Rmb 68,000/tonne ($10,733/tonne).

Industry commentators cited rising demand for battery grade lithium carbonate for electric vehicles (EVs) and the prospect
of tightening supply in China
for the increases. This situation means that prices could rise further in the foreseeable future, sources said.

Prices for Chinese lithium hydroxide (LiOH) also rose in October as strong demand gave local producers the confidence to lift offers.

IM understands that prices for battery grade LiOH in China stood at around Chinese renminbi (Rmb) 52,000-56,000/tonne ($8,187-8,818/tonne) at the end of November, up from Rmb 45,000-48,000/tonne ($7,086-7,558/tonne) at the beginning of October.

LiOH prices in other regions are reported to be stable at present, meanwhile. Sources suggested to IM that South American lithium producers, which account for the world’s largest proportion of lithium supply from low cost brine operations, may be keeping prices low to remain competitive.

SQM meanwhile reported in mid-November that revenues for its lithium segment were up 18.7% for the quarter to $59.7m from $50.3m in Q3 2014, thanks to higher sales and prices.

The company expects lithium carbonate demand for 2015 to be 5% higher than 2014, but noted that new supply scheduled to come online this year has been delayed.

"Prices continue to feel upward pressure, accordingly, our average prices for the nine month period ended September 30, 2015 exceeded $5,700 [/tonne], an increase of almost 9% when compared to the same period last year," the company said.

SQM’s CEO, Patricio de Solminihac noted during a conference call following the release of the financials that the delayed entry of new participants onto the market had meant that supply was not at the level anticipated by the market this year.

IM’s prices for lithium carbonate (min 99-99.5% LiC2O3, large contracts, del continental US) currently stand at $6-6.6/kg.

Soda ash

Next year’s contract prices for US soda ash are reported to have been agreed at an average of $5/s.ton ($5.51/tonne) above this year’s prices.

Industry reports, confirmed by IM, indicated that the increases were lower than some US suppliers had hoped for. In July, US chemicals producer Tronox Ltd increased its soda ash prices by $12/s.ton ($13.22/tonne), along with three other locally-based rivals which produce natural soda ash from Wyoming’s trona deposits.

Weaker overseas sales due to slowing demand and rising competition from Chinese synthetic soda ash were highlighted among the reasons for the more modest than anticipated increases.

Buyers have reportedly sold around half of their slated production for 2016, but the remaining deals that are yet to be concluded are likely to settle flat with or even lower than the prices for contracts already agreed.

Prices for soda ash contracts in Europe are expected to roll over next year or possibly decline slightly, one industry commentator told IM.

IM’s prices for dense soda ash (list price, ex-works Wyoming) stand at $270-290/s.ton ($298-320/tonne). Light material (list, bulk, FOB Wyoming) is priced at $188-230/s.ton ($207-253/tonne).

Rare earths

China Northern Rare Earth Hi-Tech Group Co. Ltd announced at the end of October that it intends to raise its guidance prices for praseodymium-neodymium (didymium) concentrate material by Rmb 10,000/tonne ($1,575/tonne), up 4% on previous price levels.

In southeast China, the Ganzhou Rare Earth Association has also raised its guidance prices for a number of rare earth concentrates, each by Rmb 10,000/tonne ($1,575/tonne). Medium yttrium-rich europium concentrates now stand at Rmb 180,000/tonne ($28,362/tonne); high yttrium sourced from Longnan is now Rmb 190,000/tonne ($29,938); high yttrium from Anyuan is now priced at Rmb 180,000/tonne ($28,362/tonne); and low yttrium-low europium concentrate from Xunwu has been set at Rmb 110,000/tonne ($17,332/tonne).

Since June, prices have fallen three times. While these upward movements are the first since then, prices still stand at between Rmb 30,000-40,000/tonne ($4,727- 6,303/tonne) below those reported in June. 

Meanwhile, the Ministry for Industry and Information Technology (MIIT) has announced another redoubling of efforts to deal with illegal mining for rare earths in China, which is blamed for substantial oversupply and is a contributing factor to low pricing conditions.

Zircon

Prices for standard and premium grades of zircon had edged downwards by the end of October,
to the dismay of many market
observers who had been predict-ing that prices would firm up this year.

Reported information, confirmed by IM sources, indicated that the price of Australian zircon (66% min ZrO2) had fallen by around $10/tonne since the end of September to around $1,030-1,060/tonne on a CIF China basis.

Sources familiar with the Australian zircon market told IM that the average price of zircon sand exported from the country was around $1,010/tonne on an FOB basis, down from $1,020/tonne previously.

Earlier this year, sources told IM that buyers were on their guard against suppliers attempting to leverage price increases for zircon, however October market movements are thought to be due to sluggish downstream conditions, rather than buyer pressure on suppliers.

*Conversions made November 2015

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