IM23: Looking for growth in the downturn

By IM Staff
Published: Monday, 18 July 2016

Growing middle class to drive demand in industrial minerals, however speakers expressed concerns over China’s dominance and emphasised the importance of diversifying into new markets.

This year’s Industrial Minerals Congress, its 23rd year running, 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 on 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 prices remain weak.

In positive news overall, however, the ever-expanding proportion of the global population categorised as "middle class" will ensure strong demand for industrial minerals over the coming decades.

Speaking at the Congress, Steven Fortier, director of the National Mineral Information Centre of the US Geological Survey (USGS), told delegates that increased consumption driven by the growth of this population segment would ensure sustained mineral demand.

"Movement into the middle class requires more material for everyone," he said, predicting a net increase in the demographic of 3m by 2030. 

Growth will be driven by Asia Pacific, where the middle class is expected to increase by a factor of six during the same time period.

The Middle East and North Africa (MENA) region, meanwhile, will likely double from a relatively small base level. Europe and North America, conversely, will remain relatively flat in terms of absolute numbers.

Fortier noted with concern the concentration of the production of some minerals in a limited number of countries, notably China, which dominates a number of industrial minerals markets including phosphate, with 45% of 66.3m tonnes produced in 2014; graphite, with 66% of 1.19m tonnes produced in 2014; and rare earths, with a 55% share of 123,000 tonnes produced in 2014.

"It’s nothing against China politically, but it has a very large domestic population and demand of its own (…) and assuming we’ll be able to get resources from there [indefinitely] is a little risky," he said.

Fortier also emphasised that it is difficult to predict the future when it comes to industrial minerals markets.

Citing the rapid increase in demand for silica (frac) sand in recent years and latterly its drop off, he noted that market movements have a tendency to catch people off guard.


This year’s IM Congress was held in Prague, Czech Republic, where industrial
minerals output is stabilising. (Source: Jorge Royan)

Logistics opportunities 

However, the downturn of the oil and gas industry due to falling prices has opened up opportunities for the shipping industry to expand into other industrial minerals.     

"The fact that oil and gas prices have gone down, it is seen as an opportunity for Oman," Erwin Mortelmans, commercial director of the port of Duqm, told delegates.    

Up to 80% of Oman’s exports are oil and gas, and the middle-eastern country has ambitions to open up dry bulk shipping. Oman’s energy ministry has also urged the country to move away from its main energy industry, said Mortelmans.   

With an increasing number of European countries moving away from oil and gas-powered energy production, renewables are expected to rise over the coming years, which would lift the related industrial minerals used in the sector.   

Due to the economic crisis and the drop in shipping volume over the past years, there is an overcapacity of shipping vessels and freight rates have fallen as a result.   

"The oversupply of shipping vessels will be a favour to the shippers, there is lots of opportunities to move material around," said Wilfred Knegt from shipping agency LBH Netherlands.  

Meanwhile, European fertiliser producers are expanding into warehousing in order to hold stock for quick delivery when agrimineral prices rise, a shipping source told IM on the sidelines of the event.  

"Producers are taking a position in warehouses to keep stock. In order to keep up high production rates, they are going to need more storage space," a source from one Europe-based shipping company said. 

"There is huge growth in storage, especially in fertiliser," he added.

Cutting dependence on China

Europe is attempting to cut its dependence on Chinese rare earths supply by finding ways to replace the material in the end-user chain and through new mine development, delegates heard during IM23.

China is the world’s biggest producer of rare earth minerals and has an annual output of 150,000 tonnes. Beijing has imposed policies to safeguard production methods and limit the export of this strategically important mineral. 

European and Japanese consumers are trying to engineer rare earths out of their products by changing from technologies such as magnetic drive in hybrid electric vehicles (EV) to the induction motor, said Damien Krebs, metallurgy manager of Greenland Minerals and Energy, which is developing a 20,000 tpa mine in Greenland.

There are two large rare earth deposits in Greenland, Kvanefjeld and Kringlerne. The Kvanefjeld site contains the largest rare earth deposit in the western world and the project has received €9m ($10.1m*) in funding from the EU from over the past five years. 

If production is successful, Greenland would be the biggest producer outside China, with the potential to meet 20% of global demand, which would diversify rare earth supply in Europe.

Greenland rare earth prices would also compete with Chinese material, with pre-taxed cost estimated at $8.22/kg, compared to Chinese producers Longnan at $30.88/kg, Xunwu at $19.50/kg and MYRE at $27.63/kg.

However, Europe faces the challenge of isolating individual rare earth material as the production technique is a closely-guarded industry secret in China, said Thymis Balomenos, metallurgical engineer at the European rare earth research organisation EURARE.

The process to separate rare earth material is labour-intensive, and while EURARE is attempting to optimise the process through research, Europe does not have the capacity for large scale rare earth production.

With most European high-tech companies moving their production to Asia, which is closer to the rare earth supply source, many are also questioning the need to produce the material in Europe.

Czech mineral industry stabilising

With the Congress held in Prague this year, delegates heard that production of a number of significant industrial minerals has stabilised in the Czech Republic including kaolin, bentonite and feldspar output.

According to Pavel Kavina, director of raw material policy at the Ministry of Industry and Trade, industrial minerals in the Czech Republic account for 16.7% of the country’s total mineral reserve base and make up 13.7% of the country’s mining sector.

"The Czech Republic has a long history of mining, mainly gold and silver, but also industries like Czech glass and porcelain are well-known and built on the resources of industrial minerals," Kavina outlined.

The country was also a past producer of graphite, although mining halted in 2008 as producers were pushed out of the market by competition from Chinese producers and low prices. Now, however, Kavina said the Czech Republic was looking at re-starting production as the market improves and graphite has achieved critical mineral status.

The stabilisation of mineral output is positive news for the prosperity of the country, according to Kavina who also noted that that environmentally-friendly and sustainable mining methods in addition to comprehensive use of all raw materials and subsequent reclamation minimise the environmental impact of the Czech Republic’s mining industry and secure its future.

"Most of the industrial minerals cannot be recycled nor substituted. Only several products are recyclable such as glass and ceramic fragments. Production of prospective and traditional industry minerals should be supported," Kavina added.

While the largest slice of the Czech Republic’s mineral resources are mineral fuels, the country is an important producer and exporter of kaolin, producing 3-3.5m tpa, accounting for 5% of world total crude kaolin production and 3% of global beneficiated production.

Bentonite production has also remained stable at 200,000-250,000 tpa for use as a binding agent, filler and sealant in addition to consumption by the refractory and building industries. However, general clay production decreased to around 450,000-500,000 tpa, Kavina said.

Production of feldspar and silica sand has stabilised meanwhile at 400,000-450,000 tonnes and 1.3m tonnes respectively. Other important resources include carbornates, with the Czech Republic producing 4.5m tonnes high purity limestone and 5-6m tonnes other carbonates and dolomite and diatomite, which was produced at a rate of 30,000-40,000 tonnes.

Although the country hosts 14.2m tonnes of geological reserves and 1.1m tonnes exploitable resources of graphite, no graphite has been produced for the last seven years, instead 5,000 tonnes have been imported. While Kavina described Czech graphite reserves as limited, he said that there were "promising resources".

Zeolite looks to new markets

Niche minerals were also discussed at the Congress, and speakers noted that finding new end markets is growing in importance to the zeolite industry as producers look to expand the usage of the minerals.

Dan Eyde, president of the largest US producer, St Cloud Mining, cited a variety of potential market opportunities for natural zeolites, including lightweight cements for oil and gas; high strength cements and concrete for building materials; speciality sorbents, exchangers and catalysts; municipal water treatment; and effluent treatment.

The current applications for the mineral grouping – produced mainly in China – are animal feed, water treatment and radioactive waste treatment.

But now producers must look to new uses to drive growth in the zeolite market.

"Like in other industrial minerals, to get a spot in the market you have to kick somebody out, either by having a performance edge or through pricing," said Eyde, noting that with price cuts not a viable option, the goal must always be outperforming the competition through innovation.

Borates to remain steady

While there are some bright spots in the 3.8m tonne borate market, there is no expectation of a significant expansion in demand in the coming years,  Bayram Ankarali, General Manager of Etimine SA, the European subsidiary of Turkish borates giant Eti Maden, told Congress participants.

"If there are no innovations at the moment, we are not expecting a boom," Ankarali said.

He said he expects some increase in borate demand in the Americas, fuelled by agricultural usage as a micronutrient in Latin America, while he noted that Africa represents a "good chance" for some market growth.

The oilfield industry is another area that holds promise, according to Ankarali. Use of borates in fracking could see some uptick as the market improves, notably in the US where the practise is widespread.

In Europe, however, fracking restrictions mean that this potential end market remains nascent.

Conversely, the slowdown in China, which has for the past decade been a strong market for borates, is taking its toll. Asia still remains the largest consuming region for borates, however, a position it has grown to hold since the turn of the century, today accounting for 59% of geographic demand.