Chinese New Year keeps lid on mineral markets in February

By Laura Syrett
Published: Wednesday, 24 February 2016

Antimony fluctuates, rare earths stay flat; lithium prices exaggerated, says Albemarle; graphite stagnates, chromite prices dip.

The Chinese New Year and accompanying Spring Festival holiday which takes place in mid-February traditionally mutes trading activity during the month, although suppliers in most minerals and metals markets can usually expect higher prices before and after the break, as buyers scramble to secure material before the markets shut.

This year saw relatively few price appreciations in industrial minerals markets, however. Antimony and fluorspar prices saw some slight gains over the course of the month, but industry observers generally agreed that these were temporary upswings.

Rare earths and graphite remained flat, meanwhile, and refractory minerals saw little activity – although the flat market did give these materials some respite from the otherwise negative trend in selling values.

Price rises for lithium minerals and compounds were potentially underpinned by higher than usual buying activity before the Chinese holiday, but market participants and commentators have warned that reported steep rises in the price of material in the spot market are not representative of the wider industry, where solid but modest increases have been observed.

Elsewhere, prices for soda ash look likely to be mixed this year, with some regions of the world facing overcapacity.

In the agriminerals sector, worrying signals from some of the world’s largest producers and importers indicate that prices could erode significantly over the course of 2016.

Andalusite

Profit margins for andalusite remain healthy, despite waning demand from the refractories sector, industry sources told IM in February. "It’s not the kind of industry where you can make huge margins, like precious metals, but it’s a good business at the moment," one market participant said.

Industry observers are waiting to see whether market leader, Imerys SA, will be allowed to take over South Africa-based Andalusite Resources Pty Ltd – a deal that would give Imerys an 82% share of the andalusite market and which the South African Competition Commission believes could make the mineral more expensive (see p9).

Antimony

Prices for trioxide grade antimony ingot rose slightly in China towards the end of January, before weakening again in mid-February, with values for the finished chemical remaining at weak levels below $5,000/tonne.

According to industry sources, the rally in ingot prices was prompted by inventory run downs among buyers, after several weeks of stagnant trading, but the resumption of transactions following the Chinese New Year saw additional supply reach the market, pulling prices down.

IM’s prices for antimony ingot (99.65% min Sb2O3) stand at $5,000-5,100/tonne FOB China and at $5,000-5,200/tonne CIF Rotterdam.

Prices for standard grade II antimony ingot stood at $5,275-5,485/tonne in mid-Febrary, according to Metal Bulletin.

Selling values for antimony trioxide (typically 99.5% Sb2O3) stand at $4,600-4,800/tonne CIF Antwerp/Rotterdam and $4,600-4,700/tonne FOB China.

Chromite

Robust activity in the automotive sector has slowed the decline in prices for foundry grade chromite, sources told IM.

European traders that source material from South Africa and sell it to Europe, North America and Asia, said that selling values for foundry grade chromite had fallen less than expected in the final quarter of last year.

Prices for refractory grade chromite remain under pressure, however. Sources said that chromite consumption in the wider metal casting segment remained on a downward trend, but that production of automotive parts was preventing foundry demand from collapsing.

IM’s prices for foundry grade chromite stand at $240-340/tonne for +47% Cr2O3 material (dried, 1 tonne big bags, FOB South Africa); at $225-280/tonne for 46% Cr2O3 material (wet, bulk, FOB South Africa); and at $220-250/tonne for 45.8% min Cr2O3 material (wet, bulk, FOB South Africa).

Fluorspar

Acid grade fluorspar (acidspar) prices showed some signs of recovery in February, as consumers began negotiations for summer contracts.

Suppliers reported a slight upturn in enquiries for acidspar, with an increasing number of deals being negotiated at the higher end of existing ranges.

Acidspar prices reportedly rose by up to Chinese renminbi (Rmb) 100/tonne ($15.35/tonne*) in the first half of the month, owing to an increase in demand from refrigerant chemical producers.

Sources said that Chinese port storage charges have also increased, owing to tougher regulations and increased surcharges, following the explosion at a chemicals warehouse in the Port of Tianjin in August 2015.

Although the recent surge in acidspar demand from Asian economies could lead to higher prices moving into Q2 2016, a significant rebound is not expected before 2017 due to ongoing overcapacity.

In mid-February, African operator Kenya Fluorspar announced it was suspending operations at its Kimwarer mine and plant in western Kenya, in response to shrinking demand and low prices for fluorspar. The production halt takes more than 77,000 tpa of material off the market.

Acidspar producers in Mongolia have managed to sell material at levels higher than current Chinese prices, however, leading to price disparity in the market.

Sources told IM that some producers in Asia, whose high production and logistics costs mean they are unable to offer material at prices competitive with China, were trading at slim margins above consensus price ranges in the first weeks of February.

Mongolia’s high cost position saw its fluorspar exports fall 10% year-on-year in 2015 from the prior 12 months. Suppliers in the country are reportedly securing deals at $310-$320/tonne, down just 3% from 2014.

The price for acidspar (97% CaF2, wet filtercake, FOB, China) currently stands at $240/tonne, after falling by 4% in Q4 2015.

In the metallurgical fluorspar (metspar) market, prices have stabilised owing to slow growth in the steel market. Today’s price of metspar (min 80% CaF 2, FOB China) is between $200/tonne and $220/tonne.

Graphite

China’s graphite output resumed at slow pace following the Chinese New Year holiday in early February, which marked the culmination of a sluggish 12 months for the sector.

Total exports of amorphous graphite from China last year were around 115,230 tonnes, roughly flat with the previous year when the country shipped around 114,000 tonnes. Mine production was scaled down significantly throughout much of H2 2015, as low sales and high stockpiles compelled the market’s largest producer, South Graphite, to cut its output forecast for the year.

Amorphous graphite is primarily used as a recarburiser in the steel and lubricant markets and therefore demand is closely tied to industrial activity.

A shortage of amorphous graphite supply during 2012 led to it being substituted with products such as low sulphur anthracite and coke in export destinations including Japan and Europe.

Prices remain rooted at their lowest point in two-and-a-half years, with the CIF price of Chinese amorphous material (80-85% C, -200 mesh into Europe) standing at $415/tonne.

Meanwhile, illegal graphite trading in China is reported to be distorting the flake market, as small graphite producers avoid taxes on products in order to compete with the low-priced offers of larger companies.

The black market for graphite is a historical problem in China, but in February this year, more producers than usual were said to be seeking to dodge the 17.5% VAT by failing to produce invoices on domestic transactions. Others were sidestepping the 20% export tax on flake graphite sales by mislabelling shipments, IM sources said, undermining efforts by legal traders to increase prices.

The average FOB price of flake graphite (94-97% C, +100 mesh) from Qingdao stands at $750/tonne.

Lithium

The CEO of Albemarle Corp., the world’s largest producer of lithium compounds, used the company’s 2015 earnings call in February to criticise reports about high lithium spot prices which have gained prominence recently following an article published in UK newspaper, the Economist, last month.

Luke Kissam, who heads up the US-based company, said that Albemarle’s lithium prices rose by around 3% in Q4 across its entire lithium business, with battery grades increasing slightly more.

Kissam emphasised that Albemarle, which produces its lithium from brine operations in Chile and from spodumene in Australia, would not increase the price of the battery mineral too rapidly over the coming years. "We are going to price lithium so we get value today and ensure continued growth. We are not going to price lithium out of the market," he said.  

IM’s prices for lithium carbonate (min 99-99.5% LiC2O3, large contracts, del continental US) currently stand at $6.5-7.5/kg. 

Potash and phosphate

US fertiliser producer, The Mosaic Co., has said that phosphate prices could fall by as much as 14.6% to $350/tonne by the end of March while potash prices are liable to slump by up to 21% to $200-230/tonne.

The Plymouth, Minnesota-based company is the world’s largest producer of finished phosphate products and released its full year and fourth quarter 2015 results at the end of February, showing that its Q4 net earnings fell to $155m from $360.7m a year earlier, while net sales fell 9% to $2.16bn – largely due to lower prices.

Mosaic’s warning came within a few days of India announcing that it has halted its potash imports until the end of March, as droughts have significantly reduced demand in the country. The Indian government has also delayed negotiations for 2017 potash purchases until at least June and said that imports are unlikely to top 4m tonnes.

According to Reuters, spot prices for potash currently stand at around $230/tonne, an eight-year low and down more than a quarter since last year.

Rare earths

The Jiangxi, China-based Ganzhou Rare Earth Industry Association cancelled out the 8-9% price increases it posted for rare earths in early January by lowering its guidance values for the end of the month by roughly the same amount.

The association posted its revised guidance figures on 25 January, showing cuts of between 7.8% and 9.1% across the suite of minerals it prices.

The Chinese Spring Festival kept the rare earths market at a standstill throughout the first half of February, with traders reporting flat prices. Sources in China said they thought that buying of magnet feedstock rare earths would pick up towards the end of the month.

IM’s prices for cerium oxide stand at $1.70-1.90/kg; dysprosium oxide at $215-240/kg; europium oxide at $120-160/kg; lanthanum oxide at $1.80-2.30/kg; neodymium oxide at $39-42/kg; praseodymium oxide at $53-58/kg; and samarium oxide at $1.90-250/kg.

All prices are for minimum 99% material sold in bulk on an FOB China basis.

Soda ash

Turkish-owned US soda ash producer Ciner Resources LP reported a 4.7% increase in soda ash production for the full year 2015, to 2.66m s.tons (2.93m tonnes), up from 2.54m s.tons (2.79m tonnes) last year.

The company said that average
sales prices for soda ash fell by 4.4%
on a domestic US basis last year
to $227.78/s.ton ($250.56/tonne), from $238.20/s.ton (262.02/tonne) in 2014. International sales prices increased by 3.8%, however, to $162.11/s.ton ($178.32/tonne) from $156.16/s.ton (171.78/tonne), on average, over the same period.

US soda ash producers reportedly secured a $5/s.ton ($5.50/tonne) increase in contract soda ash prices for 2016 compared to last year, which was less than they had hoped.

Kirk Milling, Ciner Resources’ CEO, said the company is expecting to produce higher volumes this year, but that gains in sales may be offset by softer international pricing and higher freight and royalty costs.

TiO2 minerals

Mineral sands miners with operations on three different continents have were forced to review  their production rates in February, as oversupply, weak demand and falling prices for titanium dioxide (TiO2) minerals and zircon continued to weigh on the sector.

ASX-listed Base Resources Ltd is facing an oversupply burden of 20,000 tonnes of high grade TiO2 feedstock over the next financial year, as one of its long term contracts has decided to reduce its rutile intake.

The company did not give any indication that it plans to rein in production, however, saying that it believed it would be able to sell the additional capacity on the spot market.

Market leader Iluka Resources Ltd announced shortly afterwards that it would suspend operations at its Jacinth-Ambrosia mine in South Australia from 16 April this year for between 18 months and two years in a bid to draw down global inventories and restore healthy macroeconomics for the mineral sands industry, in response to indications that the market would take longer than expected to recover.

Thirdly came an announcement by US mineral sands producer Southern Ionics Minerals LLC, which operates titanium mineral mining and processing plants in Georgia, where the company said it would cut staff and output at is facilities, although it did not give a figure for the reduction in volumes.

Ilmenite market prices are $110-120/tonne FOB Australia, while rutile values stand at $790-890/tonne, according to the IM Prices Database. Zircon prices for standard grade material are at $1,000-1,050/tonne FOB Australia.

Analysts at research group Jefferies expect TiO2 prices to remain under pressure in the first half of 2016, meanwhile, despite the recent $0.07/lb ($154.32/tonne) average price increase announced by major producers of the pigment chemical.

"Contract structures, adverse weather, demand seasonality and overcapacity continue to hinder price discussions, leaving visibility more opaque than the product itself," the firm said in a research note.

At the end of January, leading Chinese TiO2 producer, Sichuan Lomon Titanium Industry Co., raised the price of its pigment material by Rmb 300/tonne ($45.61/tonne), up 3% on previous levels. The increase was Lomon’s second in the space of a month and took the company’s TiO2 prices to more than Rmb 10,300/tonne ($1,567/tonne).

According to Jefferies, the price increases are unlikely to have any
bearing on the structurally-long export European region, where EU TiO2 contract prices have fallen by $0.05-$0.06/lb ($110-$132/tonne) to $0.95/lb ($2,094/tonne).

"In the US, the proposed price increases serve only to signal that prices could find some support if demand improves by the time contracts roll over in Q2 and Q3," Jefferies outlined in its note.

Full information on all IM’s prices can be found on the IM Prices Database at www.indmin.com/pricesdatabase. For premium fluorspar and graphite prices, visit the mineral tabs on the IM home page.

*Conversions made February 2016