Let’s talk about mineral prices

This year’s 23^rd Industrial Minerals Congress was once again well attended despite the current market downturn.

Delegates travelled to Prague in the Czech Republic to drum up new business and listen to presentations from an array of speakers including producers, consultants and processing companies. 

Much of the conversation circling IM23 centred on the need for innovation no matter the industry, as well as the necessity to reflect and re-evaluate current production processes in the downcycle. Speakers focused predominantly on cost and energy savings, as well as technology that is able to "do more with less" particularly as mineral grades decline and mineral prices remain weak.

And, while the economic climate makes it difficult to give an accurate forecast of what 2016 might hold, IM editorial market reporters took to the stage to discuss current and potential future pricing trends in lithium, titanium dioxide (TiO₂), graphite and fluorspar. 

The IM team takes to the stage to discuss pricing.

While China has been the dominant power in the natural graphite industry for a generation, as consolidation escalates, industrial regulations tighten and major investment flows into value-added markets, doubts have emerged as to whether the domestic industry is likely to continue its dominant position in the market. 

Benefitting from huge reserves, China has been leading the market as a price strategist – a trend which is likely to fade away – following a drop in the country’s raw material exports, slowing growth in demand from traditional markets and emerging new capacities.

Stagnant growth in traditional graphite end markets, largely refractories, remains sluggish with demand side pressure mounting over prices since H2 2012. Prices for some commonly traded higher mesh grades have fallen by 70% since the second half of 2012, while similar drops have been registered in fines. 

The only market making some waves is spherical graphite, on the back of it's use in batteries for electric vehicle (EV) industry.

The dullness in demand from traditional markets has pushed existing producers and explorers towards performing research and development to produce battery-grade material driven by the EV boom. 

This has seen most graphite explorers in countries like Madagascar and Canada, developing their projects to be a sustainable source of battery-grade graphite material required as anode in lithium-ion (Li-ion) batteries.

Besides the spherical grade, other specialised graphite grades including expendables, micronised and purified graphite have seen steady growth in demand showing greater resistance to the market volatility, while retaining higher price levels. 

Graphite pricing trends

Fluorspar: Albert Li, Analyst 

The acid grade fluorspar (acidspar) market, accounting for 60% of total fluorspar production, continues to bear the brunt of the fluorochemical slowdown with lower consumption rates putting pressure on the prices.

Acidspar prices dropped by 25% on average in the last two years owing to the persistent lull in market demand, with downstream markets suffering the effects of a weak global economy, regulatory changes pertaining to GWP emissions, and the large oversupply which caused a backlog throughout the supply chain. 

This was further compounded by new low-cost supplies coming from Vietnam, Thailand, Afghanistan and Germany triggering price undercutting in the market clogged with excessive material.

The trend has pushed acidspar prices to five-year lows and squeezed producers' profit margins as prices near production cost levels.

Consequently, the producers with low-production costs are most likely to weather the mix of high inventories demand.

In the metallurgical grade fluorspar (metspar) market, more stability has been observed in terms of prices although enquiries have slumped on the back of slowing steel growth, the major consumer market for metspar.

Metspar is used as a flux for melting and refining of steel in integrated steel plants and foundries, and as such demand for this commodity is closely tied to the growth of these industries.

The recent trends foreseen in the global steel market have played a major role in influencing the demand for metspar, which has not just led to squeezing consumption rates, but also a shift in regional trade patterns. 

With China sourcing the majority of its metspar from producers in neighbouring countries additional low-priced supplies from Afghanistan, Iran and Pakistan has intensified competition in an oversupplied market.

This left trades settling at lower end of the ranges.

Acidspar price trends

Lithium: Myles McCormick, Reporter

The market for lithium has undergone a significant shift over the course of the past nine months. Traditionally used primarily by producers of ceramics and greases, contracts tended to be annual agreements between buyers and sellers.

But the rise in lithium-ion (Li-ion) batteries, fuelled in particular by increased demand for electric vehicles (EVs) has changed the market significantly. Additionally generous government subsidies for EV production in China especially have caused a spike in lithium demand, creating a spot market in that country that has driven lithium prices to unprecedented levels.

Chinese spot prices for both lithium carbonate and hydroxide have increased by factors of three-to-four over the past nine months, while large contract prices in the rest of the world have begun to track it upwards, though not to the same heights. 

A dip in the China spot price has been registered in the past number of weeks, however, as the government pursues an investigation into cheating on its subsidy programme, causing battery producers to become more cautious. Observers have said this dip will only be temporary. 

Despite the general high spot prices, however, most material is still shipped at prices agreed in late 2015, under one year contracts at set prices with big battery producers. The market will watch with anticipation to see how negotiations for 2017, which are set to begin this September, pan out.

Lithium price trends

Titanium Dioxide: Kasia Patel, North American Editor

The industry supply chain has suffered from a gap between TiO₂ prices and its feedstocks, rutile and ilmenite, and although this issue was identified by suppliers and traders around two years ago, this disparity persists.

Due to oversupply in the feedstock sector, any price changes in TiO₂ do not immediately trickle down to benefit raw material suppliers and until –the overcapacity issue is addressed or end user demand significantly rises, pigment producers will continue to enjoy low input costs without passing down any of the benefits.

Delegates were keen to discuss price trends and forecasts.

While pigment producers are attempting to implement price increases across the board, both in China and the rest of the world, analysts are arguing that a best case scenario for TiO₂ this year will be a stabilisation in prices. 

Chinese producers have announced six prices increases in 2016 alone and the country’s TiO₂ Industry Association expects further price rises owing to low inventory levels among pigment suppliers.

Despite the announced price hikes, market participants have told IM that TiO₂ producers have yet to recoup the decline in global prices over the last two years.

Market participants are doubtful that the increases are being reflected in market prices against a backdrop of TiO₂ oversupply.

In feedstocks, consolidation and a move towards chloride route pigment production was expected to drive demand for higher quality raw materials, but so far this has not come to fruition due to competition from imports, technology blockers, foreign expertise and a lack of incentives or tax cuts for those who upgrade their technology.

Consolidation and M&A activity is expected to continue though, with government encouragement for the creation of a small number of sulphate route TiO₂ producers with around 300,000 tpa capacity and chloride route producers with 100,000 tpa capacity. China’s plans anticipate, or hope, that chloride route technology will account for at least 20% of the country’s output over the next several years, but the speed of change remains to be seen.

Additionally, recovery rates will also need to be improved and waste generation and energy consumption will need to be cut so that China’s products can compete on a global market and command higher prices. 

Pigment and feedstock producers have faced a grim few years, however the general consensus is that 2016, finally, marks a turnaround for the industry.

US TiO2 pricing trends

Consolidation will help cut overcapacity in Asia and push up prices, while in North America spending on durable consumer goods has risen in tandem with new housing starts, supporting the supply-demand balance. The building sector has not yet fully recovered from the downturn but the construction sector in the US is on an upswing.

There is some evidence that pigment inventories have normalised in North America and that price increases implemented by TiO₂ producers are starting to gain traction in the continent, market participants have told IM. This has fuelled reports that prices for TiO₂ and zircon had stabilised at the end of April and beginning of May, albeit at lower than ideal levels. 

Major producers in North America pushed up TiO₂ prices in the first two quarters of this year and at the end of last year marking an increase of around $300/tonne in order to remain in the market. While this may not be the price rebound industry players had hoped for, an uptick in demand for end products such as paints and coatings was reported in company results such as PPG Inc. and AkzoNobel, and the stabilisation indicates that prices may have at least finally bottomed out.

Despite this, year-on-year (y-o-y) prices still remain at significantly lower levels, resulting in declining sales and net profit for many major producers.

The oversupply of ilmenite and rutile that has led to the widening gap between the announced TiO₂ price and the feedstock prices, continues to loom.

Major feedstock producer Sierra Rutile is bringing online 888,000 tonnes rutile and ASX-listed MZI Resources Ltd began mining at its Keysbrook leucoxene project in Western Australia in November. 

On the flip-side, Iluka suspended its ilmenite and zircon mine in Virginia due to weaker prices at the end of 2014, and Chemours has brought its new Mexican TiO₂ line online, although most of this additional capacity is a balancing out of other shut-downs and a move to more efficient production.

Iluka has, however, forecast that $1.6bn will be spent on new mineral sands projects, and while it expects a supply shortfall this remains to be seen.

New players into the market will need to be highly cost competitive and produce high quality product in order to gain traction. New entrants are also banking on the trend towards chloride-route technology in China to create demand for high quality titanium mineral feedstocks.  

TiO2 price trends, Asia

Contact us 

If you have any comments or concerns, or wish to discuss any of the prices listed please contact:

Myles McCormick for lithium at mmcormick@indmin.com

Shruti Salwan for graphite and fluorspar at ssalwan@indmin.com

Albert Li for China prices at ali@indmin.com

Kasia Patel for titanium dioxide at kpatel@indmin.com 

Full information on all IM’s prices can be found on the IM Prices Database additional information on graphite and fluorspar can be found on IM’s Premium Pricing Service