Talk From The Top: What those at the helm make of the last two years in industrial minerals markets

By IM Staff
Published: Saturday, 21 May 2016

While the majority of industrial mineral market participants are bracing themselves for another tough year, IM spoke to key industry players about adapting to current conditions and seeking out new markets.

Every two years since 1974, the great and the good of the industrial minerals industry have gathered together to take stock of their particular industries and share ideas at the IM Congress.

Two years ago, we thought we were at the bottom of a terrible cycle and we approached key people in the industry to ask them how they were protecting themselves from the various headwinds approaching. As the industry readies itself for another Congress amid shakier fundamentals across the board, we once again approached industry leaders and asked for their opinions and advice on the market.

Hensen Graphite Co.: Haibo Mo, General Manager

Have you modified output in response to market conditions?

In the past few years, the graphite market has been coming down dramatically, especially in the refractory market – quantity is reduced and price competition is very fierce. Therefore, we reduced output for refractory use regular flake graphite, middle carbon flake graphite, and high carbon flake graphite. However, on the other side, we have increased our output for specialised grades which have more value added, such as expandable graphite, high purity graphite and graphite sheet.

Have you seen any new end markets, or an increase in interest in a specific region?

It would be graphene, the most popular topic right now. We are also working on this market. 

What headwinds are you expecting to face in the next two years?

We are expecting headwinds from cost increases and new markets developing. Although we are one of the model graphite companies in the case of environment issues in China, we still need to invest millions of Rmb for waste treatment facilities, and this has and will continue to increase our production costs. Therefore, we no longer have a price advantage for traditional markets and we have to look to markets which can accept more value-added products. This process is not easy – we are upgrading equipment, improving management and educating employees – but we believe this is the correct direction for our company. 

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Graphite prices for the refractory market have dropped a lot, mainly because of market demand and a slow economy. For example, in Spring 2014, the -195 EXW price was Rmb 4,200/tonne, VAT tax included, while now it is only Rmb 2,900/tonne. 

Prices for low grade expandable graphite, for regular grade spherical graphite and for high carbon flake graphite have also dropped due to raw material price drops and fierce competition. However, prices for high grade materials, like high grade expandable graphite, high grade high purity graphite and high grade spherical graphite remain very stable. 

Guangzhou Shangyear Ceramic Material Co.: Rachel Hua, Manager

Have you modified output in response to market conditions?

Yes, we cut down and even stopped our [fluorspar] production in Q1, because the market price couldn’t support factory production costs. Since Q2, fluorspar fines (acidspar) prices started to rise and we resumed production. Now production is stable and sales are on the rise.

Have you seen any new end markets, or an increase in interest in a specific region?

We still focus on the downstream industries for fluorspar, such as hydrofluoric acid, welding, steel and ceramics.

What headwinds are you expecting to face in the next two years?

This year is still going to be a tough year, and if we survive, we have faith that the market will improve next year.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Our fluorspar price has dropped nearly 20% since last year, mainly due to decreasing market demand. This year [China] has implemented several mining policies regarding the depleting resource and national environmental protection. Once the mining scale is controlled, the small domestic factories will gradually be eliminated from the market. Production will definitely decrease and prices will surely go up.

Power Stand Development Co.: Albert Chan, General Manager

Have you modified output in response to market conditions?

Nothing has changed in our company. 

Have you seen any new end markets, or an increase in interest in a specific region?

Our main end markets are still traditional industries such as refractory, foundry and steel. Though graphite used in Li-ion batteries has a bright future, for the moment we haven’t found suitable customers to start and make some business.

What headwinds are you expecting to face in the next two years?

The main headwind is still the impact on traditional industries caused by the status
of the global economy. If recovery in the global economy is difficult, then graphite demand remains at low levels, and this will bring negative influences on our sales and prices. 

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

The average price of natural flake graphite has decreased about 20-30% over the past 24 months. I don’t think we will see meaningful and substantial price recovery until the second half of 2017, assuming no new projects go into production in the next 12 months and there is no supply shock from China.

Fluorspar Commission of China Nonmetallic Mineral Industry Association: Yue Xu, Vice Secretary

Have you modified output in response to market conditions?

Our output has been stable this year although there were fluctuations in the market sometimes.

Have you seen any new end markets, or an increase in interest in a specific region?

Yes, for us a new area of application is the power battery industry and EV industry.

What headwinds are you expecting to face in the next two years?

At present we cannot speculate.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

In the past two years, the price of fluorspar was always falling due to oversupply, but this changed in Q1 of this year which recently initiated a price rebound.

South Graphite Co.: Haoran Chen, Manager.

Have you modified output in response to market conditions?

Yes, we have adjusted our mining plan according to market demand. Though the total mining quantity is the same, the mining structure has been adjusted – now we mainly produce FC-80 grade and we are gradually decreasing mining quantity of low grade graphite. 

Have you seen any new end markets, or an increase in interest in a specific region?

Not yet. But we expect to finish a graphite purification project in H1 2017, when we may focus our business on refractory market development. 

What headwinds are you expecting to face in the next two years?

This should be that the economy may continue to fall, the Japanese market may remain in a depressed condition and prices may continue to fall.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

In the past two years, graphite briquette to Japan, which is our main export product, has seen prices decrease, and the main reasons are low demand and [the current] price war. Now the export price for this product has reached the bottom while on the other hand costs continue to rise, so price trends in the future may be stable at current levels, or fluctuate only a little bit. If China can strongly execute the sanctions on North Korea, which exports cheap amorphous graphite to China, then prices may rise in a small range.

MRC: Mark Caruso, Executive Chairman

Have you modified output in response to market conditions? 

We haven’t modified our output – we are expanding production. 

Have you seen any new end markets, or an increase in interest in a specific region?  

There is no increase in physical market demand, simply the shutting down of non-profitable mines in China has seen a requirement for replacement finished and concentrate from imports.

What headwinds are you expecting to face in the next two years? 

We expect to see some pricing pressure to the upside for ilmenite and zircon. The industry will suffer from lack of capital investment in the coming years and, with a greater restraint from the bigger industry suppliers like Iluka, RBM and Tronox you will see pricing in down steam pigment products.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Pricing in zircon has remained relatively stable in the context of production restraint and demand out of China. Ilmenite pricing has come under enormous pressure due to market entrants being compelled to sell at any cost to meet highly leveraged debt. However, saying that, we are starting to see some abatement and strengthening in ilmenite pricing due to curtailment or mothballing of supply in China and globally by the bigger companies.

Core Consultants Inc.: Lara Smith, Managing Director

CONGRESS1  


Has industry output been modified in response to market conditions?

Lithium output has always responded rapidly to market conditions and changes. Initially it was dominated by hard rock producers and was considered an industrial metal for glass. In 1997 this all changed with the extraction of lithium carbonate from brine reserves by SQM. Now over the last 18 months or so, lithium batteries for EVs no longer are something happening in laboratories, but are actually being put into production so again we see the rise of junior miners, both new and those that were previously placed on care and maintenance.  

Lithium output has always responded well to changing market conditions. Now lithium is a battery and EV story, so the response in terms of number of companies and output is expected. 

Have you seen any new end markets, or an increase in interest in a specific region?

Lithium is currently a Tesla story (EV battery story). Interest is all about batteries right now.

What headwinds are you expecting the industry to face in the next two years?

It has been suggested (though I’m not of this opinion) that the rollout of EVs is happening much faster than expected. If this is indeed the case, then there may be a mismatch in terms of supply coming on stream vs demand in the short term, in which case we should see prices rising in excess of 25% depending on the outlook.

If we look rather five or six years out, then we expect to see more sophisticated recycling techniques which could efficiently extract lithium carbonate from EVs at an economical rate as well as alternative storage solutions – one solution is a zinc/bromine battery which is gaining interest (though bromine may end up being a limiting factor). Anyway, substitution and recycling should moderate lithium prices. 

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Prices have rallied. In November/December last year we saw some Chinese contracts soar from $413,000 to $23,000/tonne. Overall over the last six months we’ve seen imported 99% pure lithium to China increase by
42% y-o-y.


Socidedad Química y Minera SA (SQM): Felipe Smith, Commercial Manager, Industrial Chemicals

CONGRESS2  


Has output been modified in response to market conditions?

SQM is increasing its annual [lithium] output during 2016.

Have you seen any new end markets, or an increase in interest in a specific region?

Demand of lithium for battery materials is growing strongly, particularly in Asia, and remains the main driver for lithium demand growth.  

What headwinds are you expecting the industry to face in the next two years?

Demand is expected to increase by more than 10% per year over the next two years. New supply is expected to enter the market over the same period, but with some delay resulting in lower inventories and tighter availability.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Prices have been under upwards pressure over the last two years and we believe that trend will continue, at least in the short term.

Stormcrow Capital Ltd: Jon Hykawy, President

CONGRESS3  

Has industry output been modified in response to market conditions?

Not in a major way, to present.  However, the incumbents are starting to plan for the future. We’ve seen Albemarle sign a memorandum of understanding (MoU) with the Chilean government regarding a significant potential increase in production capacity, SQM sign a joint venture (JV) with Lithium Americas and discussions positing a production increase from Talison and the Greenbushes Mine have been ongoing. Orocobre is continuing its production ramp-up and there are other juniors that are at various stages of development. I don’t believe we will have to endure any meaningful period when lithium is in physically short supply.

Have you seen any new end markets, or an increase in interest in a specific region?

The most obvious ongoing change in the lithium industry is the continued growth in battery demand and the ongoing growth in automotive demand for lithium batteries within the battery segment. The industry is continuing to adjust to the amount of lithium required per kWh of energy storage, given the changes in cathode chemistries being utilised since the mid-1980s. But the continuing upward trend in demand is clear.

What headwinds are you expecting the industry to face in the next two years?

Not that many. The most obvious is the old adage that "high prices cure high prices". Right now, lithium prices seem to be peaking at very high levels. Our belief is that this is a result of physical commodity traders entering a relatively small market, with the intention of driving prices higher and profiting. The behaviour of prices for lithium chemicals is similar to what happened in 2007-2008 to uranium or in 2010-2011 with rare earths. The major difference, however, is that the fundamental demand trend for uranium in 2008 was flat and for rare earths in 2011 was down (due to damage to demand caused by the price spike). The fundamental demand trend for lithium is up, so while we may see prices correct down, that should not last long or be as pronounced as the fall in some other commodities where financial speculation played a role.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Over the last two years, prices for lithium chemicals have done well, especially compared to other commodity materials. Recently, prices have rocketed higher, especially in China. We expect prices to pull back toward historical norms for a period of time, but continue a steady, slightly bumpy path, up and to the right, through 2025. There really is no option but lithium batteries for portable energy storage and that isn’t going to change overnight. Lithium will do well for many years to come.


FMC Lithium: Tom Schneberger, VP, Global Business Director

CONGRESS4  


Has output been modified in response to market conditions? 

FMC continues to increase the production of speciality lithium products such as lithium hydroxide, butyllithium and high purity metal. This is where we will continue to focus our investment.

Have you seen any new end markets, or an increase in interest in a specific region?  

Energy storage applications are currently the largest driver of growth. However, lithium benefits from having diverse applications, most of which are also growing at more modest rates.

What headwinds are you expecting the industry to face in the next two years?  

As a small portion of Li-ion battery costs, we expect lithium to benefit from the continued increase in energy storage applications for years to come. Growth could slow if EV adoption is low, but all indications to date point to an adoption rate that is ahead of original forecasts.   

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future? 

Prices have been increasing. Over the next few quarters we expect the biggest concern for lithium purchasers to be ensuring they have contracted ample volume with reliable producers to support their growth plans.

Imerys: Thierry Salmona, Member of the Executive Committee

Have you modified output in response to market conditions?

Imerys is addressing numerous markets, and therefore there is no general answer to the question. As a rule we try to always adapt production to market demand so as to optimise our working capital. In 2015, we have very clearly decreased proppants output to adapt to much lower demand. In other markets we have adjusted output when necessary to cope with the demand. 

Have you seen any new end markets, or an increase in interest in specific regions?

We see our innovation efforts open new markets in areas that we were addressing much less before. This is the case for agricultural products and for pharma and beauty. Plastics and polymers have been another strong market. Our acquisition of S&B has opened to us new, attractive markets in sand casting foundry and continuous casting fluxes. In turn, those markets may be served by other minerals from Imerys. This approach of growth by adjacencies has been a constant of Imerys strategy. 

What headwinds are you expecting in the next two years?

We are in a world of uncertainty. It is very difficult to predict where the headwind will come from. However, we will draw on our strengths and robust business model to continue to implement our development strategy while adapting our industrial assets to a global economic environment that remains volatile. We will in particular benefit from the contribution of recent acquisitions and pursue the investment in new products to serve growing markets and expand geographically. 

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Imerys’ innovation strategy as well as detailed marketing allows the company to maintain a price level that compensates for the increase of cost of factors, and more. None of our products are listed on a metal index and we sell performance, and not chemical content. Imerys did not participate in the price rally of 2008 but did not suffer either from the collapse following the global financial crisis. 

Group DF: Maxim Voronin, Metallic Titanium Head of Sales

CONGRESS5  


Have you modified output in response to market conditions?

We expect that the positions of Group DF will continue to grow, as it continues to invest in the development of two more MCCs – Stremigorodsk and Motronovsk. We assume that in the long term, the availability of our own raw material base and building a vertically integrated holding company, will provide us an opportunity to establish more competitive selling prices.

While the demand for metallic titanium for industrial applications falls, the consumption of titanium for the aerospace industry is on the contrary increasing steadily. Taking into account current market trends, ZTMC (Zaporozhye Titanium & Magnesium Combine, part of group DF) is gradually adjusting the structure of its product portfolio. Therefore, at the end of 2015 and the beginning of 2016, ZTMC reduced production volumes of metallic titanium for industrial applications and started a gradual reorientation for the production of titanium for aerospace applications with higher requirements. We expect that the demand for titanium sponge for aerospace application will continue to grow in the future. Furthermore, the production and sale of such products is more marginal. 

Have you seen any new end markets, or an increase in interest in a specific region?

We believe that the Ukrainian TiO2 market remains one of the key market makers in Eastern Europe, although according to our estimations it occupies up to 3% of the global TiO2 market.

What headwinds are you expecting to face in the next two years?

Currently, the total capacity of titanium sponge producers qualified for aerospace applications exceeds existing demand. Nevertheless, according to market experts’ forecasts, demand and supply may become equal by 2020. Therefore, companies from the aerospace industry are expanding dialogues with various suppliers of titanium sponge for the aerospace industry with a view to their further qualification as additional titanium sponge suppliers.

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

The prices on the Ukrainian market [for TiO2] grow together with global prices. In our opinion, a few main drivers are pushing the prices of TiO2 up. The first one is a gradual recovery for the key economies, such as the EU and the US. This contributes to increasing TiO2 demand mainly in such industries as construction as well as the production of paints, varnishes, polymer processing, pulp and paper industry. The second factor is much more significant; during the crisis, the production of TiO2 was unprofitable for the global chemical companies, that’s why the companies have increasingly begun to allocate this production into a separate businesses in order not to incur losses in the future and bring the higher prices in line with the market.

Due to a number of factors, the prices for the titanium sponge have fallen recently – in particular, due to the imbalance in supply and demand, and due to the significant product stocks in the supply chain of the global players. Currently, the prices are determined mostly by the demand and supply ratio, than by the cost structure or the cost of the titanium sponge production. We expect the prices for the titanium sponge in the next few years to return to a level that will make possible the businesses to operate with sufficient marginality.

Sierra Rutile Ltd: Neil Gawthorpe, Marketing & Logistics Director

CONGRESS6  


Have you modified output in response to market conditions? 

Sierra Rutile took the decision to expand its production through the Gangama project at a time when many mines were reducing or curtailing production against a backdrop of declining commodity prices. The rationale behind this decision was that a structural deficit in the supply of high grade titanium feeds was looming and the company wanted to be well positioned to capitalise on any resultant uptick in pricing.

The downside risk to this strategy was mitigated by the fact that the increased production volumes would, by further leveraging the existing infrastructure, bring unit costs down to market leading levels, which would enable the company to weather an extended period of price stagnation, if necessary.

Have you seen any new end markets, or an increase in interest in a specific region?

In 2015 around 80% of our sales went into the chloride pigment sector in Western Europe and North America. In 2016, both of these markets remain strong and will again make up the majority of our sales portfolio. However, it has been particularly pleasing to see the titanium sponge market emerge from a prolonged destocking phase, which has seen the major participants running at low utilisation levels. In 2012, Sierra Rutile supplied almost 50% of its volume into the sponge market and the company recently announced that it would restart supplying this sector from H2 2016.

What headwinds are you expecting to face in the next two years?

There is the obvious concern that the global recession could take longer to recover than initially forecast. However, in the mining space, many commentators believe that there are several commodities that could show much earlier signs of recovery and it is pleasing that the high-grade titanium feeds sector is being included as one such "bright spot".

How have prices in your markets been affected over the last two years, and where do you see them going in the foreseeable future?

Sierra Rutile saw average prices for its natural rutile decline 3% y-o-y from 2014 to 2015, so, in the context of the wider commodity space, pricing has fared pretty well. Coming into 2016, prices started where they left off in 2015 and have remained stable as we move through H1. With much better news coming from the major pigment producers recently, there is optimism that announced pigment prices will begin to stick in Q2/Q3 and this should see feedstock pricing begin to gain traction, if not later this year then definitely as we move into 2017.