2015 kicked off with a series of promises from the Chinese
government to overhaul the magnesia industry as part of a wider
shakeup of the refractories sector. During the year, the
government made several steps in this direction, swooping on
magnesia smuggling rings and setting targets for production
plants, with non-compliance punishable by closure.
Despite the potential for supply chain disruption, producers
outside of China remain concerned about the low cost of Chinese
magnesia products when compared to materials produced in Europe
and the US.
In China, supply was constrained by a series of measures set
out by the government in December 2014, intended to tackle
problems in the domestic refractories industry. In January, the
Shanxi municipal bureau of quality and technology supervision
met with 65 refractories companies from Yangquan, Shanxi, and
set out six measures to bring the industry up to globally
These measures included a pledge to develop and expand
industrial parks by consolidation; adjust product structure;
establish recognised brands; build talented and professional
teams; protect resources; regulate mining; and save energy.
China’s Ministry of Industry and Information
Technology (MIIT) then revealed its standard conditions for the
refractories industry, effective from March 2015, which
followed these recommendations.
January saw the first strategic agreement signed between a
refractories company and an iron and steel producer, when WISCO
Refractory Materials Co. Ltd, a subsidiary of Wuhan Steel and
Iron Corp. (WISCO), agreed to develop refractory products with
Xinyu Iron and Steel Group.
Outside China, in February, Russia’s Magnezit
Group signalled its intention to expand its reach beyond the
domestic market by signing a deal to supply a Serbian copper
smelter with refractory linings, via its Slovmag subsidiary in
Slovakia, as well as a cooperation agreement with Vamtec SA to
distribute its products in Brazil.
Elsewhere, other non-Chinese producers were vocal about the
challenge of competing with Chinese production costs. Speaking
at IM’s MagMin 2015 conference in
Athens, Greece, in May, Michael Tsoukatos, director of
development at Grecian Magnesite, said that what had
traditionally been a low-margin industry is under increasing
pressure from cheap Chinese material. Tsoukatos was speaking
about caustic calcined magnesia (CCM), but the same issue was
acknowledged by operators in the deadburned magnesia (DBM) and
fused magnesia (FM) markets.
Leading Brazilian magnesia and refractories producer,
Magnesita Refratarios SA, saw mineral sales increase over the
year when compared to 2014, driven by a 100% increase in sales
of DBM to third parties, reflecting productivity gains at its
Brumado mine, however the company reported a 48-fold increase
in losses in Q3 thanks to business write-downs in Brazil and
Austrian refractories producer RHI AG said in April that it
would reduce FM production to around 30,000 tpa from Q4 2015 to
cut costs and because of low market prices.
Belgium’s Sibelco SA said in September that it
would restructure its workforce at the Parkhurst magnesia
processing plant in Rockhampton, Queensland, Australia, and its
nearby Kunwarara-based mine. As of the end of 2015, it was
still unclear whether this would affect the
company’s magnesia supply from Australia, which is
run via the former Queensland Magnesia Pty Ltd (QMAG).
Kunwarara produces around 3m tpa magnesite ore according to the
US Geological Survey (USGS).
In the US, Martin Marietta had a mixed year as it grappled
with fluctuating demand for magnesia from the steel industry
but posted record Q3 sales totalling over $1bn in November,
thanks to what it described as a construction-led recovery in
raw materials consumption.
UK-based refractories producer Vesuvius Plc meanwhile
continued to suffer from weak steel demand in mature markets
and at the end of November said it expected 2015 earnings would
be at the lower end of forecasts.
Chinese refractories demand is expected to slip to 24m
tonnes in the next two to three years while output will drop to
26m tonnes, Dianli Chen, vice director and chief secretary of
China’s Refractory Association said at the end of
Local media reports in China over the course of 2015
suggested that some companies had halted magnesia production,
although this did not appear to significantly moderate
oversupply and downward price pressure.
According to Roskill Information Service analyst, Jess
Roberts, lower refractories production and consumption in China
will not necessarily result in lower consumption of refractory
minerals across the board. For some materials such as
high-grade DBM and FM, there may actually be higher consumption
in refractories because of an overall trend towards using
higher quality refractory products.
Other speciality markets for magnesia, particularly CCM in
sectors such as hydrometallurgy, electro-fused magnesia, rubber
and plastics, chemicals and magnesium oxide (MgO) panels for
the construction industry, are reported to be holding up better
than refractories, however these industries do not consume
large enough volumes to counteract the overall negative trend
in magnesia demand.
Magnesia prices slid over the course of 2015, with many
industry observers blaming the decline on weak demand from
steel markets and oversupply. At the beginning of the year,
IM learned that prices in China were being
forced down by anonymous bidders with large inventories and
that producers were facing "unsustainably thin margins" of less
In the Chinese FM market, producers pointed to low demand
putting pressure on prices. According to export data analysed
in the middle of 2015, prices and exports were down around 35%
when compared to 2014 levels.
Efforts to regulate prices for Chinese magnesia are being
made, however. Christopher Zhao, assistant director of the
Liaoning Special Resource Protection Office, told MagMin
delegates in May that the Northeast Asia Magnesia Materials
Trading Centre had been established in March 2014 to solve the
problems of low pricing and industry infighting, as well as to
provide financing for Liaoning magnesia companies. A planned
magnesia price index will help discover and "lock in" prices
for magnesia products, Zhao explained.
Looking ahead, there are some indicators that high-quality
magnesia will hold up better than lower grades in an overall
declining market. Prices are expected to remain stable to weak,
as demand is dragged down by a lacklustre steel
Several companies have moved to expand global reach and seek
new markets and most accept the need to innovate to stay
competitive. The 2020 Olympics in Tokyo, Japan, could also
create a regional pocket of relatively strong demand.