2016 Year in Review

By IM Staff
Published: Thursday, 15 December 2016

A round up of the year's main events in major global industrial minerals markets such as lithium, agriminerals, rare earths and titanium dioxide.

IODINE

Iodine prices continued to slide in 2016, as the battle for market share between major producers in Chile saw the market remain in oversupply. 

Towards the end of the year, there were indications that a price floor may finally be in sight, with producers hinting they would not cut prices further.

Supply Security 

Sociedad Quimica y Minera SA (SQM) and Cosayach, Chile’s two largest suppliers of iodine crystal, were at loggerheads during most of 2016, as each company vied for a larger share of the market at the other’s expense.

Market observers expressed confidence that persistently low prices would push high-cost producers out of the market, leaving larger players to swoop on the resulting supply opportunities. These predictions failed to materialise, however, as even small producers clung on to their positions.

Market demand

Iodine and related compounds are mainly used in the healthcare market, in x-ray contrast media and pharmaceuticals, as well as in liquid-crystal-display (LCD) screens and iodophors.

Increasing demand for LCDs and x-ray contrast media is expected to underpin incremental demand increases in the coming years, however the trend in 2016 was merely flat to slightly positive, reflecting end market growth patterns.

Price Trends

The battle for market share between SQM and Cosayach drove spot prices down throughout 2016, from $27-30/kg at the beginning of the year to $19.50-21/kg in late November. Q4 contract prices were around $20.50-22/kg.

Iodine prices at the end of 2016 were less than a third of the peak $60-95/kg range reached in 2011, following the Tohoku earthquake and consequent tsunami in Japan in March of that year, and are around 40% down on their pre-spike levels of $32-34/kg.

Since 2011 as Japan recovered from the effects of the disaster and new supply came online in Chile, prices have steadily eroded. Some industry observers have speculated that, at current prices, some Chilean producers must be selling material below cost.

Outlook

In November, iodine market participants suggested they might engineer a halt price declines. At least one major supplier indicated that it would not sell iodine below $20/kg, while various distributors spoke of "a concerted effort" to push prices up.

There has as yet been no concrete evidence of this predicted uptick materialising and suppliers will need to unite in setting a price floor in order to establish a meaningful threshold.

SODA ASH

Significant production cuts to soda ash capacity in 2015 failed to prevent the oversupply persisting throughout the last year, as new production came online while demand wavered. 

Supply security

In early January soda ash inventories in China were reported to be low and restocking coincided with supply disruptions resulting from a wastewater dam failure at Shandong Haihua Group Co. Ltd’s 3m tpa soda ash facility in Weifang. These factors contributed to a price rebound, but the market continued to worry about surplus volume from China’s 29m tpa soda ash output flooding export markets. 

Also in January, Uzbek state-owned JSC Uzkhimprom doubled its soda ash capacity to 200,000 tpa and in March, Turkish industrial group Teyo Yatrim Ve Dis Ticaret AS announced plans to build a new soda ash plant in Belarus’ Gomel Oblast.

Anticipating potentially tough market conditions ahead, in April Belgium’s Solvay SA decided to idle 105,000 tpa soda ash capacity in Egypt.

In September, Turkey-based Ciner Group said it would bring its long-awaited new soda ash production online in 2017 and aims to ramp up to full capacity of 4.4m tpa at the start of 2018.

Market demand

Weak demand for flat glass in China at the beginning of the year was linked to the slowdown in the country’s real estate and construction industries, although consumption by detergent and chemicals began the year on a strong footing.

In March, the China Soda Ash Association said the domestic soda ash industry made a profit of Chinese renmimbi (Rmb) 370m ($53,4m*) in 2015, the first positive return in four years.

Chinese government stimulus packages early in the second quarter boosted domestic building activity and revived soda ash consumption by the glass sector, while detergent and chemicals markets remained solid.

But after a period of recovery, the glass market stabilised while Chinese soda ash production continued to rise, leading to higher exports and increasing competition with North American suppliers selling into Southeast Asia.

Price trends

US soda ash producers secured a $5/s.ton ($5.50/tonne) increase in contract soda ash prices for 2016 compared to 2015, which was less than they had hoped for. In March, Chinese producer Shandong Haihua Group reported that soda ash prices in China had increased by Rmb 250/tonne ($36.11/tonne) since the previous November, owing to tighter local supply and American National Soda Ash Corp. (ANSAC) subsequently announced it would raise prices for US soda ash by $25-30/tonne.

Chinese soda ash producers pushed for further price increases in October, citing higher production costs, but as yet there has been no evidence of an industry-wide hike.

Outlook

Higher production costs in China could lay the ground for soda ash price increases in early 2017, while positive Chinese real estate and infrastructure data towards the end of the year bode well for glass demand.

Soda ash markets in other parts of the world look set to remain relatively stable.

ANTIMONY

Antimony trioxide prices and availability both fluctuated markedly in 2016, as Chinese government regulations influenced the market, while consumption of antimony trioxide remained broadly flat with the previous year.

Supply security

China’s full-year export quota for antimony ingot and alloy was slashed by 36% year-on-year (y-o-y) to 5,673 tonnes in 2016, while the antimony oxide quota was cut by 8% to 54,000 tonnes. 

China accounts for up to 80% of the world’s antimony supply, so the lower export quota significantly constrained supply, causing prices to soar from the historically low levels seen throughout 2015.

Antimony projects in other parts of the world have been under pressure from low prices over the last few years and few were in a position to add meaningful volumes to the global market this year.

UK-listed Tri-Star Resources Plc did manage to make progress with its Oman Antimony Roaster project, a joint venture with Omani company Strategic & Precious Metals Processing LLC. It produced its first metal in April and in November Tri-Star said it had increased the roaster’s throughput capacity from 36,000 tpa to 50,000 tpa.

Market demand

While fundamental demand for antimony compounds remained steady in 2016, buyers responded to China’s quota cut by rushing to make purchases ahead of Q4 to guarantee supply through to the year end.

After a frenzied mid-year period, there was a lull in the market early in the final quarter and demand stagnated somewhat in October. Buying picked back up again slightly in November, in step with seasonally high purchasing activity in the antimony trioxide flame retardant market. 

Price trends

Antimony trioxide prices reacted to the unexpected supply shortage this year. Prices of $4,600-4,700/tonne FOB China in January remained relatively steady in H1, giving way to rapid increases from July to September, taking prices up to $6,600-6,700/tonne.

These values were corrected back down to $6,300-6,400/tonne FOB China in October, increasing to $6,400-6,500/tonne in late November. 

CIF Antwerp/Rotterdam and CIF New York antimony trioxide prices also tracked this pattern at premiums dictated by freight and other charges. In late November, these prices stood at $6,500-6,600/tonne and $6,600-6,700/tonne, respectively. 

Outlook

After a turbulent year, the antimony industry approached the end of 2016 with uncertainty, particularly regarding the future direction of Chinese policy. Underlying demand is not predicted to shift significantly in either direction in the foreseeable future, however. Chinese producers are expected to continue undercutting their European counterparts on prices.

CHROMITE 

The situation in the non-metallurgical chromite sector at the end of 2016 appeared very different to how it did in 2015. 

The removal of supply capacity this year has enabled the chromite market to recover, with the general upward trend in prices steepening over the summer months, shifting decisively to a seller’s market as the industry approaches 2017.

Supply security

Chromite output in South Africa, the single largest producer of the mineral, fell throughout this year compared with 2015. This particularly affected high-purity ore, with 44-48% chromium oxide (Cr2O3) content, as underground sites where these grades are mined became too expensive to operate.

Volumes produced the first half of 2016 fell by 16% to an average of 154,437 tpm from 184,000 tpm in H2 2015. 

Capacity reduction was mainly achieved through mine closures. In the second quarter of this year, US speciality minerals company Minterals Technologies Inc. (MTI) closed its 100,000 tpa. Ruighoek chromite mine and sand plant in South Africa. Coupled with the closure of the Dilokong chrome mine in South Africa late last year, it took a large volume of foundry grade sand out the market.

Outstanding inventories from these mines remained available for sale during 2016 and were absorbed gradually by the market.

Once leftover production is cleared, however, South Africa’s status as a high-purity foundry and refractory-grade chromite supplier will be diminished.

Market demand

After declining chromite consumption trends last year, 2016 saw a progressive recovery in demand, albeit from a low base.

From the summer months onwards, supply tightened, coinciding with a robust rebound in Chinese demand for chemical grade chromite and, later, foundry grade material. 

The overall reduction in global chromite supply meant that inventories at Chinese ports were not replenished to the same extent as they were last year.

In India, a relatively strong steel sector this year has generated steady demand for foundry materials, allaying fears surrounding weaknesses in the market that had emerged in the preceding two years.

Price trends

Prices for most chromite grades bottomed between Q4 2015 and the early months of 2016. Since then, the market has gradually started to pick up, with increases becoming steeper from September onwards. By December, spot prices were well in excess of levels recorded in 2015.

Outlook

The majority of market sources agree that skyrocketing chromite prices seen in 2016 are not sustainable in the long term and predict that prices will start to come down next year. Price trends will vary, however, according the availability of different grades.

 

RARE EARTHS

The last 12 months have seen further regulation of China’s rare earths industry as the country’s government continued its struggle to bring this unruly sector under control.

The number of active non-Chinese rare earths exploration companies dwindled further as investor confidence all but disappeared and the only producers of rare earths outside China have had to strive against persistently weak prices.

Supply security

In January, China’s government launched a rare earths-tracing system as part of a broader policy aimed at improving supply chain accountability in China. It was hoped that the tracing system would also assist in the campaign to stamp out illegal rare earths mining, as the Chinese government sought to control where and how rare earths are mined and processed.

In May, the city of Baotou in Inner Mongolia offered three-year subsidies to companies to upgrade their technology for manufacturing value-added rare earth materials and by the end of Q1, rare earth alloy production from Baotou had doubled year-on-year to 35,050 tonnes.

In July, the Chinese government set its 2016 rare earth mining quota at 105,000 tonnes and, in October, it unveiled the Rare Earth Industry Development Plan 2016-2020, which revealed a scheme to increase Chinese rare earths output to 140,000 tpa by the end of the decade, with a 50% share of the high-value materials market.

Meanwhile, the government of Russia approved a plan in February to increase domestic rare earths production, which currently accounts for an estimated 1.3% of global supply, and said it was evaluating the possibility of lunar mining for the minerals.

A joint venture (JV) between IST Group, Rostec and TriArk Mining announced it would construct a $110m hydrometallurgical plant in Krasnokamensk, close to the Chinese border, to process rare earths from the Tomtorskoye deposit in Yakutia in central-eastern Russia, as part of a $1bn project. Although the scheme is supported by the government, the JV has yet to find all the funding it needs to bring the mine and plant into operation by its target date of 2021. 

In North Korea, the imposition of UN trade sanctions in March following a series of nuclear weapons tests by the communist state reportedly threatened to interrupt rare earths supply from the country to China, Japan and Russia – however none of these countries would own up to trading the minerals with North Korea or being affected by the embargo. 

In India, the national government announced plans in April to auction off rare earths mining blocks in the Barmer district of Rajasthan to encourage exploration and production of monazite. But progress in Barmer is understood to have been slow and the main domestic supplier of rare earths continues to be Indian Rare Earths Ltd, which recovers the minerals from beach sand mining in the country’s southern provinces.

In May, the EU-funded I²MINE project coordinated by Sweden’s LKAB claimed to have developed innovative deep-mining strategies capable of cutting Europe’s dependence on imported rare earths within four years. The €25.9m ($27.5m) project also promised to curb environmental damage, by conducting underground mining using new hard rock mining technologies.

Elsewhere, Australia’s Lynas Corp. has struggled to remain afloat amid weak rare earths prices and rising debts. In October, the company negotiated a reduction in its debt repayments and secured a three-year extension to the operating licence for its rare earths processing plant in Kuantan, Malaysia. It said that it was producing rare earth products at around 90% of its 400 tpm design capacity in the three months to the end of September.

There are still a few exploration companies developing rare earths projects to advanced stages, despite the gloomy market outlook. These include Alkane Resources Ltd and Hastings Technology Metals Ltd in Australia, Greenland Minerals and Energy in Greenland and Mkango Resources Ltd in Malawi.

Market demand

In mid-2016, China’s largest rare earths miners collectively forecast weakening financials in the second half of 2016 as prices remained low and trading conditions difficult.

In contrast, producers of neodymium-iron-boron (NdFeB) magnets offered an upbeat assessment of the market, saying that demand was steady for rare earth magnet materials, although this was partly to do with the low raw material prices which reduced costs.  

China’s Rare Earth Industry Development Plan 2016-2020 emphasised growth in three main end markets: magnets, catalysts and energy storage. It also encouraged the development of new applications for rare earths, which the Chinese government hopes will increase net consumption of the minerals, however market observers have cautioned that it will take some years for any breakthroughs of this kind to generate real demand.

In the meantime, while magnet and catalyst markets remain stable to strong, other traditional uses for rare earths such as phosphors and polishing powders still face oversupply and lack the necessary growth to support prices.

Price trends

Chinese guidance prices for rare earths sagged at the beginning of this year, particularly for heavy minerals produced in the southern provinces, before starting to rise in April after China’s "big six" rare earths companies began stockpiling as part of a government-backed resource protection scheme.

A central government stockpile announced in June failed to lift prices further, however, and even sent the market into reverse as sentiment judged that there was ample supply to build stocks and meet export demand. 

In the fourth quarter, prices were lower than they had been a year before but appeared to have stabilised, according to list prices published by some of China’s largest producers.

Outlook

The weight of Chinese rare earths supply is likely to continue dragging down average prices until there is some decisive policy move by China to shut mines, or new demand emerges.

While the timing of the former is unpredictable, notwithstanding the provisions of China’s Rare Earth Industry Development Plan, the latter possibility is not realistic in the immediate or short term. 

Would-be market entrants will therefore have to work closely with downstream rare earths users and tie-in purchase contracts, since the open market is unlikely to support new supply at economic levels.

TITANIUM DIOXIDE

2016 began with a spate of financial losses for major titanium dioxide (TiO2) producers, including US firms, Tronox Ltd and The Chemours Co., setting the tone for what proved to be another tough year for the industry.

TiO2 prices and demand began the year on a downward trend, but in the months that followed, global producers banded together to push through a number of price increases, which began to stick in H2. This has resulted in more positive market sentiment in mineral sands, with ilmenite prices increasing by up to 60% in Q3.

Supply security

Chemours, which was spun off US chemicals giant DuPont in 2015, and Cristal Global, owned by Saudi Arabian conglomerate, Tasnee, remain the two largest players in the TiO2 sector. Chemours had cut 150,000 tonnes from its TiO2 capacity last year by closing the Edge Moor facility in Delaware and shutting down a production line in Johnsonville, Tennessee, but in September this year it launched a new 200,000 tonne TiO2 line at its Altamira plant in Tamaulipas, Mexico.

US-headquartered Huntsman Corp. remains the world’s third largest TiO2 producer with capacity of around 734,000 tonnes, although last year the company announced plans to spin off its pigment division, which it purchased from New Jersey-based Rockwood Holdings Inc. in 2014. 

In July, Huntsman said it would close its smallest production plant, the Umbogintwini facility in South Africa, in Q4 2016. This will pull 25,000 tpa TiO2 offline, in addition to the company’s previously announced plans to axe 100,000 tonnes of capacity in Europe.

Supply has also shifted among producers in China, where consolidation of the TiO2 sector is underway. China has been growing in prominence as a source of TiO2 to the global market, as domestic suppliers attempt to upgrade processing methods to add new chloride-route capacity in order to compete with the West on quality. In Q2 2016, the country exported just over 200,000 tonnes of pigment – the highest quarterly volume ever shipped from China.

Leading Chinese producers Henan Billions Chemicals Co. and Sichuan Lomon Titanium Industry Co. announced plans to merge in May 2015, but the tie-up has yet to be concluded, partly because of delays in securing funding. 

Market demand 

After a rocky start to the year, by the third quarter leading US paint producer PPG Industries noted that overall coatings sales volumes had increased, as industrial and packaging coatings outpaced other markets and architectural coatings grew in North America. However, European demand for architectural coatings declined, as did the market in the Middle East and Africa, while marine coatings remained weak worldwide.

In mid-October, Dutch paints and coatings manufacturer AkzoNobel confirmed that while overall sales volumes remained flat in the third quarter, there was positive demand for decorative paints in Asia, in addition to stronger overall consumption of industrial coatings. 

Earlier in the year, in February, AkzoNobel said it wanted to buy BASF’s coatings division and in October, it revealed that acquisition talks were in progress and that it expected to complete the purchase by the end of the year. 

AkzoNobel also broke ground this year on its Indian powder coatings plant in Mumbai, as it looks to benefit from fast-growing coatings demand in the country. 

Around 1% of global TiO2 supply is consumed by the food and pharmaceutical industries in consumer goods such as sunscreen, toothpaste, powdered sugar and sweets. However, consumers are growing increasingly concerned about the content of food and cosmetics, and following public pressure in 2015, two major bakery chains, Panera Bread and Dunkin’ Donuts, announced they were ditching TiO2 as an ingredient from their baked goods. This trend continued into 2016, when confectionery producer Mars Corp. committed to removing TiO2 from its sweets in November.

Last year, the French Agency for Food, Environmental and Occupational Health and Safety (Anses) sent a proposal to the European Chemicals Agency (ECHA) to classify TiO2 as a category 1B carcinogen. 

1A or B carcinogen classification could have significant implications under the EU’s Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation, as substances in these categories are restricted in consumer applications.

The public consultation of France’s proposal ended on 15 July 2016. The ECHA’s Committee for Risk Assessment has 18 months from time of receipt to adopt an opinion on any classification and labelling proposal and present its independent scientific opinion to the European Commission (EC) for a final decision.

Price trends

Several major TiO2 producers announced a number of price increases this year, while Chinese manufacturers had attempted to push through 11 price hikes by late November.  

In August, Tronox reported the first sequential increase in TiO2 prices since 2012, predicting further improvement in the third quarter as higher prices are rolled out across its customer base. 

Chemours implemented global price hikes in January and May, followed by a $150/tonne increase in September for its European, Middle East and Africa and Latin American customers. 

Additional price increases in the fourth quarter were led by Huntsman, which raised selling prices in October for all TiO2 pigments, effective 1 January 2017.

Outlook

The uptick in TiO2 prices in demand in the second half of 2016 enabled producers to operate at higher capacity rates, although the traditionally slow demand period of the northern hemisphere winter could create a speed bump for the sector’s momentum towards the end of 2016. 

IM sources have expressed confidence in continued growth, saying that current price discussions pave the way for additional price improvements in the first half of 2017, while a recovery in Chinese industrial activity should boost domestic pigment consumption. 

However, political and economic uncertainty in Europe and North America could weigh on TiO2 global demand next year.

AGRIMINERALS

2016 was a tough year for fertilisers, categorised by overcapacity and low prices for potash and phosphate. A decrease in crop prices, refinancing in Brazil and El Nino weather patterns affecting the agricultural sector in India continued to force capacity cuts in fertiliser products.

Supply security

In January Canada’s Potash Corp. of Saskatchewan (PotashCorp) said it would indefinitely suspend operations at its Picadilly, New Brunswick operations, as tightening fertiliser prices ate into margins.

Despite low prices, Morroco-based Office Cherifen de Phosphate (OCP) has brought a new fertiliser plant online in February. OCP, already the largest exporter of phosphates globally, said it aims to increase its fertiliser production to 12m tpa by 2017, from 4.5m tpa in 2010.

In contrast, North American fertiliser producer The Mosaic Co. announced plans in February to curtail phosphate production by up to 400,000 tonnes owing to a longer period of weak demand.

In April, Anglo American sold off its phosphate operations in Brazil to China Molybdenum Co as part of its strategy to divest non-core assets. 

The following month, NYSE-listed Intrepid Potash Inc. announced plans to idle operations at its West potash mining facility in New Mexico after the company reported a loss of $18.4m in the first quarter of 2016. The Carlsbad-based mine accounted for 42% of the company’s muriate of potash (MOP) output in 2015, but a combination of decreasing potash prices, high outstanding inventories and foreign competition made the operation uneconomical.

Major German potash and salt supplier K+S experienced a number of supply difficulties from May onwards owing to issues with the disposal of wastewater and tailings at a number of its German facilities. While the company was slated to bring supply back online in November, a major fire at one of its facilities meant further supply delays. As such, overall 2016 production is expected below 2015 levels. 

Mosaic, the world’s top phosphate producer, announced plans in July to idle its Canada, Colonsay potash mine – which has an annual capacity of 2.6m tonnes.

Meanwhile UK AIM-listed Sirius Minerals Plc received government approval to develop facilities at Teesside port for the export of polyhalite fertiliser mineral from a mine in North Yorkshire – its last major required approval for the development of the project.

Elsewhere in the UK, ICL announced plans in August to bring forward production of polysulphate and reduce its potash output as global prices continued to fall, resulting in 140 job losses.

Also in August, BHP Billiton said it planned to put the completion of its Jansen potash project in Canada on hold, while K+S also said that output from its greenfield Legacy project in Canada would be delayed until Q2 2017.

In September, PotashCorp and Agrium announced plans for a merger, which is anticipated to close in mid-2017. The newly formed company will be one of the largest crop nutrient producers in the world.

Market demand 

With tightening prices in the industry, both potash and phosphate producers continued to struggle, revealing declining revenues for full year 2015 results announced in January. 

ICL noted that 2015 had been a mixed year for fertiliser minerals, with an 18% increase in Chinese potash imports to 9.4m tonnes being offset by an overall decline in global shipments for potash and phosphate, as a result of lower crop prices, currency fluctuations and weak monsoon rains, and these trends continued into the first half of 2016.

While potash contracts between producers and major Chinese and Indian consumers are generally signed early in the year, in January China said it would hold off on finalising contracts until as late as April. 

The country, which is the world’s largest potash consumer, had enough stockpiled material to tide it over for the start of 2016, allowing it to defer agreements with major potash producers, including Uralkali PJSC, Belaruskali and Canpotex Ltd.

China paid $315/tonne for potash contracts in 2015, although by January 2016 prices had fallen by as much as 30%. 

While Israel Chemicals Ltd (ICL) managed to sign an early deal with Chinese customers in January, it gave no indication as to prices, which it said were "established in line with prevailing market prices in China".

Major deals with Chinese and Indian customers were finally signed in June and July, however falling prices for both potash and phosphate continued to hinder company results in the first and second quarters of the year, despite capacity cuts. 

As weak demand persisted for fertiliser minerals and a number of companies planned to divest agri-assets or reduce capacity, in June, Canadian potash exporter Canpotex International PTE decided to scrap plans for the development of a potash export terminal in Canada, saying it had sufficient terminal capacity through existing logistics networks.

Price trends

Prices for solid phosphate fertilisers came under pressure during at the end of 2015 and in early 2016 as record Chinese exports, seasonally slow demand in India and the US, and continued caution in Brazil created weak demand for the mineral.

Average phosphate prices for Q4 2015 were however reported in line with the previous year at $522/tonne, as liquid fertiliser prices were more resilient and offset declines in diammonium phosphate (DAP) and monoammonium phosphate (MAP), according to Mosaic.

By February, phosphate prices had fallen by 30% since the fourth quarter of 2015, and were expected to continue to do so. 

Major Chinese potash contracts which had been delayed were eventually signed in June at levels of around $227/tonne – over 30% lower compared with contracts signed in January 2015. Potash contracts signed with Indian consumers were also agreed at similar levels. 

Outlook

Both potash and phosphate producers announced improved sales volumes in the third quarter of 2016, but lower y-o-y prices continued to restrict notable improvements in earnings.

BAUXITE AND ALUMINA

Bauxite and alumina markets remained subdued throughout 2016, as a handful of closures and mergers reshaped the sector in North America, Europe and Asia.

The US saw the closure of Alcoa Inc.’s Point Comfort plant and Sherwin Alumina Co.’s refinery, both in Texas. The Sherwin shutdown, announced in August, was part of the company’s Chapter 11 liquidation process. The firm was a casualty of the bankruptcy of one of its main customers, US-based Noranda Aluminium Holding Corp., the preceding February.  

In Europe, French industrial minerals conglomerate Imerys SA bought the fused alumina businesses of another French company, Alteo, consolidating supply of this material in the region.

Indonesia maintained its restrictions on exports of unprocessed metallurgical bauxite this year. Some industry observers had suggested that the embargo could result in non-metallurgical bauxite being diverted into metallurgical markets, although to date there has been no meaningful supply or price indication that this has taken place. 

China’s clampdown on its most polluting industries led to domestic closures of fused alumina and refractory-grade bauxite production facilities throughout 2016, while restructuring of the country’s oversupplied steel sector further weakened demand for refractory materials, including alumina.

Meanwhile, stubbornly low global oil and gas prices severely dampened demand for bauxite-based ceramic proppants in the fracking industry.

Supply security

The closure of Alcoa’s Point Comfort plant and the bankruptcies of Noranda Aluminium and Sherwin Alumina dented US non-metallurgical alumina supply. Of the facilities that were shut down, between 10% and 20% of their output was estimated to have been non-metallurgical aluminas.

The cessation of Sherwin’s operations led German functional fillers producer Nabaltec AG to halt production at its US subsidiary, Nashtec LLC, after its main source of alumina was cut off. The company is temporarily supplying local customers from its German site while it investigates options for reopening Nashtec.

In July, Imerys announced its acquisition of three of Alteo’s four plants, making white fused alumina (WFA), brown fused alumina (BFA) and tabular alumina. The deal effectively reduces Alteo’s operations to a single calcined alumina facility in Gardanne.

Canada-listed Orbite Technologies Inc. finally started its high-purity alumina (HPA) plant in Quebec in October, although the company cut production after less than a month of operation, saying it had enough material to calcine 10 tonnes HPA, meeting its immediate needs.

The Chinese government’s stricter stance on pollution led it to enforce regulations requiring domestic alumina plants to use natural gas rather than coal for fuel generation in the first half of this year. Following a series of inspections in the summer, many facilities were forced to close – a move that was most likely designed to curtail supply and rid the market of inefficient capacity.

In Malaysia, metallurgical bauxite mining was banned for most of the year to reduce stockpiles.

Market demand 

The fragile state of the global steelmaking industry continued to drag on bauxite and alumina-based refractory materials demand in 2016 and even a rebound in Asian and North American steel production from the second quarter had not fed through to refractories by the end of the first half.

Chinese demand for refractory bauxite decreased significantly this year as the country curbed its steel overcapacity, although market participants reported stronger domestic demand for BFA and WFA in November.

In North America, some alumina suppliers have sought to fill the gap left by Sherwin, Noranda and Alcoa. Alumina trihydrate (ATH) maker Southern Ionics Inc. told IM the closures had left "a large void" in the market and that it is intends to expand its production of wet, dry hydrate and calcined alumina for chemical, ceramic, glass and refractory use.

Ceramic proppants had a tough year, with oil prices falling to historic lows of below $40/barrel (bbl) in January, slashing drilling activity and with it demand for oilfield minerals. Higher-cost fracking activities for shale oil and gas bore the brunt of the stoppages and demand for bauxite-based ceramic proppants, which are more expensive than frac sand, slumped.

Proppant producers gradually reduced output throughout 2016, but most maintained operations at low volumes or kept plants in production-ready status in the hope that oil prices will soon move back to sustainable levels.

Some speciality aluminas, such as ATH for flame retardant applications, saw robust demand in 2016. As western countries move away from bromine-based halogenated flame retardants on safety grounds, demand for ATH-based products is growing.

New bauxite and alumina producers are steering clear of traditional end markets where possible. Australian Bauxite Ltd kicked off production at its Bald Hill mine in Tasmania in August and is targeting a number of speciality sectors, including cement and fertilisers.

Price trends

Refractory bauxite prices remained flat during the early part of 2016 before low demand caused them to fall in a weak downward trend that characterised the market for most of the year.

In the alumina market, BFA prices were supported by supply disruptions caused by intensifying environmental controls in China over the summer months, while WFA prices were mostly stable, with a few upticks in Chinese prices in H2.

In the third quarter of this year, a 30% reduction in the maximum loads of Chinese trucks resulted in an immediate increase in logistics costs for China’s alumina producers, although a corresponding rise in sale prices has been slow to materialise.

Outlook

The closure of some US alumina capacity may help rebalance the North American market in line with demand in 2017.

Chinese closures may also tighten supply there and eventually trigger price rises, although there have so far been no definitive signs of the market strengthening.

In Europe, Imerys’ increased share of the alumina market could give the company the power to push through some price increases in the near future.

 

FLUORSPAR 

Fluorspar prices fell to new lows in the first half of 2016 amid weak demand and overcapacity. Steel market demand for metallurgical fluorspar (metspar) remained soft, despite an upturn in steelmaking globally from the second quarter, while capacity closures were offset by new production coming online in Asia and South America.

Supply security 

In January, Belgian chemicals group Solvay SA abandoned operations at its fluorspar mine in Chiprovtsi in Montana province, Bulgaria owing to the depletion of fluorite reserves and sluggish market conditions, taking almost 30,000 tpa acid-grade fluorspar (acidspar) offline. 

High inventory levels restricted buying activity, while new capacity from projects in Thailand, Afghanistan and Argentina weighed on metspar prices in early 2016.

By February, falling demand and prices for fluorspar forced Kenya Fluorspar Co. to once again suspend operations at its Kenyan mine from the end of April, taking 77,000 tpa out of the market. 

Despite challenging industry conditions, in May, AIM-listed Tertiary Minerals Plc managed to secure a £500,000 ($624,680) investment to further its fluorspar projects in Nevada, US, and Storuman in Sweden. 

In mid-2016 Canada Fluorspar Inc. received approval from the St Lawrence government to proceed with the development of its AGS fluorspar mine project in Newfoundland, Canada, which will have a nameplate capacity of 200,000 tpa.

Market demand 

End markets for fluorspar remained weak throughout the year due to the slowdown in global construction and a slump in fluorochemicals demand. Congestion in the fluorine supply chain pulled operating rates in China’s aluminium fluoride (AIF3) sector down as low as 45%.

Most fluorspar producers reported frail financials throughout the year. In February, Mexican producer Mexichem SA de CV said that its profits had been negatively impacted by lower metspar consumption rates and prices, but were partially moderated by steady demand for acidspar and refrigerant gases.

Reducing greenhouse gas (GHG) emissions has become a priority for an increasing number of countries, prompting regulatory changes and a shift towards eco-friendly fluorochemical substitutes. Major producers have said that this is unlikely to negatively impact acidspar demand, however, as alternative chemicals are still likely to be fluorspar-based.

Tighter profit margins led some Chinese producers to exit the spot market altogether in 2016 and restrict sales to long-term contracts. But the heavily discounted price environment means that these companies are unlikely to secure strong margins on large orders.

Low fluorspar demand in the steel and cement sectors was particularly pronounced at the start of 2016, with a slump in Chinese steel production driving down prices from Mongolia and forcing capacity closures. 

Although China’s steel sector began to recover slightly in the second quarter, the government’s policies of capacity reduction and closing the most polluting steel mills had a knock on effect on Chinese metspar demand.

Metspar is used as a flux in steelmaking and is also an important raw material in cement and welding markets, meaning that wavering construction activity this year has undermined consumption. Cement and welding consume around 100,000 tpa metspar, representing around 2% of global demand.

Metspar also faced competition from other fluxing materials in 2016, cutting producer requirements to around one tonne of metspar per thousand tonnes of steel. The emergence of alternative fluxes, such as alumina-based blends, could see utilisation rates fall further.

Price trends

Prices for both acidspar and metspar began the year at low levels, due to a combination of oversupply and weak end market demand as a result of the slowdown in global construction markets.

Chinese acidspar prices dropped 4% in the first quarter of 2016, due to the weaker Chinese renminbi, which led some producers to extend lower export offers in the hope of securing business. This downward pressure on prices was exacerbated by aggressive price undercutting from the new generation of low-cost acidspar suppliers emerging in Southeast Asia, mainly Vietnam and Thailand.  

The low-priced offers amid stagnant demand took some grades to their lowest price levels in four-and-a-half years during the quarter, with soft consumption rates restricting any attempts to raise selling values.

In contrast, acidspar prices from Mexico remained mostly stable in the first three months of this year, mainly because of limited trading activity on the back of overcapacity in the fluorochemicals sector and a lack of purchasing activity in hydrofluoric acid (HF) and AlF3 markets. The second quarter of 2016 saw a slight uptick in fluorspar demand due to seasonal buying in countries where hot summers spur demand for air conditioning chemicals, mainly India and the Persian Gulf countries.

This failed to boost acidspar prices, however, as consumption rates generally remained low across downstream markets and prices fell continuously for the majority of grades throughout Q2. 

While FOB China prices did rise to around $280/tonne in the second quarter due to heavy rain affecting supply and some renewed demand, new supply from Southeast Asia and high inventories in the fluorine supply chain stymied further upward movement.

Average metspar prices continued to drop throughout the majority of the year, falling by 19% in September as demand from traditional steel and cement markets remained limited. Excess supply in China also forced domestic sellers to offer low prices on international markets. 

Outlook

Towards the end of 2016, metspar and fluorspar prices were holding steady and an economic stimulus driven-rebound in Chinese construction and infrastructure offered some hope of recovery in demand. 

However, a rebound in fluorspar prices is unlikely unless global economic conditions improve on current lacklustre growth rates, or suppliers cut production and help to rebalance the market. 

Attempts by producers to lift prices have so far proved unsuccessful, with buyers rejecting higher offers amid increasingly competitive supply and flat to weak demand.

Fluorspar consumers have noted that Italy-based fluorochemical producer Fluorsid Spa’s buy-out of the Odda AlF3 operation from Norwegian smelting company Boliden AB, confirmed in October, could influence raw material consumption rates.

 

OILFIELD MINERALS

The downturn in the worldwide oil and gas sector in the last few years has been more pronounced than expected and 2016 was difficult for oilfield mineral suppliers. Rig counts for onshore drilling, a major end market for silica (frac) sand, barite (barytes), bentonite and proppant minerals, continued to drop globally, particularly in North America, in the first half of the year, although by the third quarter the pace of decline had slowed.

Changes in technology used by oil and gas exploration firms, as companies drill more stages per well in order to cut costs, have led to the price of oil becoming more detached from rig count figures and a less concrete indicator of demand for oilfield minerals, as more frac sand is being used per well.

Supply security 

In 2016, ten frac sand producers accounted for 65% of market supply, but production utilisation in the year to November remained at just 25-30% of capacity.

In Q2, US-based Eagle Materials Inc. reported a 68% decline in frac sand volumes and financial losses were reported by other oilfield mineral players including Baker Hughes Inc., Halliburton, Carbo Ceramics Inc. and Fairmount Santrol Inc.

Logistics costs have become increasingly relevant to frac sand profit margins, prompting some suppliers to integrate distribution capacity. In February, US-based Twin Eagle Sand Logistics LLC opened a new rail terminal in Texas to supply sand to regional oil and gas drillers in response to higher demand. In August, US Silica Holdings Inc. announced plans to purchase frac sand logistics company, Sandbox Enterprises LLC.

US barite producer Double Crown Resources Inc. announced in August that it had been issued a patent for its interlocking, intermodal commodity transport system, Translock. Double Crown began supplying barite products to the oil drilling industry in 2015, but told IM that its barite business has been put on hold owing to the decline in the oil and gas sector.

In the third quarter, some oilfield mineral companies decided to risk restarting operations on signs of a market revival. Ohio-headquartered sand producer Fairmount Santrol reopened its Menomonie frac sand facility in Wisconsin and completed the expansion of its Wedron silica mine in Illinois in order to increase supply flexibility. Texas-based Hi-Crush Partners LLC also reopened a frac sand facility in Wisconsin, after amending customer contracts to give the firm higher demand visibility. 

Away from the US, oilfield services company M-I SWACO was granted approval in September by Perth and Kincross Council to develop a barite mine in Duntalinch, UK. 

Market demand

Onshore oil and gas activity fell by 30% in 2015 and dropped a further 20% in 2016, with the rig count hitting a low of 417 in the middle of the year. 

Baker Hughes cut around 3,000 jobs in Q2, taking its total headcount reduction to 26,000 in 18 months. However, a slight increase in onshore oil and gas activity in the US and a seasonal uptick in Canada did enable the company to reduce its loss by 44% from Q2 to Q3 and increase its North American revenues by 1%.

While there was scant relief from revenue declines for suppliers of more expensive proppants in the first nine months of the year, a number of frac sand companies able to offer cheaper materials to buyers saw volume improvements from the second to the third quarters.

In November, US Silica reported Q3 frac sand sales of 1.6m tonnes, flat year-on-year (y-o-y) and up 21% sequentially. The firm suggested that the frac sand market had bottomed in the third quarter and was in the early stages of recovery in Q4.

In Europe, UK-listed Cuadrilla Resources Plc was allowed to proceed with plans to frack a potential shale gas resource in Lancashire, northern England, after a council ban was overturned in October. Fellow UK operator IGas Energy Plc was granted planning permission in November to develop a hydrocarbon well site and drill two exploratory wells in north Nottinghamshire.

November also saw the Scottish government release a series of reports on the economic, environmental and health impacts of fracking in Scotland, ahead of a public consultation in January 2017, as it decides whether or not to permit the practice.

Price trends

While frac sand prices remained down y-o-y in 2016, producers noted quarter-on-quarter increases in the three months to the end of September – a trend which is expected to continue into early 2017 as capacity reductions have led to tighter supply.

Proppant prices have been slower to respond to the slight rise in oil and gas activity, although prices for some premium products such as Northern White frac sand did sustain increases by producers in the second half of the year. 

Outlook

In early November, Donald Trump was elected president of the US. Trump has expressed his avid support for the fossil fuels sector and put forward plans to open onshore and offshore rig leasing on federal land, eliminate moratoria on coal leasing and open shale energy deposits, with the aim of becoming independent of imported energy from "the OPEC cartel or any nations hostile to [US] interests". 

This is despite experts pointing out that the decline in US drilling activity has primarily been due to low global oil prices, rather than a lack of political support. 

Prior to Trump’s election, in July, consultancy firm Douglas-Westwood (DW) predicted that a turnaround in oil and gas industry investment is unlikely to materialise before 2018, as demand growth over the next year will probably be outpaced by expansion in supply.

However, figures from the American Petroleum Institute (API) indicated that the number of wells drilled and completed in Q3 2016 contracted by just 2.7%, compared to average quarterly declines of 17.3% in the previous 18 months. The agency’s statistics director, Hazem Arafa, said that this demonstrates "that the consistent decline in oil and natural gas drilling could be coming to an end".

For oilfield mineral demand, high inventory levels need to be worked through before market-moving restocking can take place.

 

GRAPHITE

The past year was characterised by continued weakness in prices and demand for most grades of graphite.

Established producers have complained of low margins and difficulty in shifting volumes, although the graphite exploration sector remains well populated, despite thinning investor interest.

Overcapacity has been cited as the main drag on the graphite market, but suppliers have stubbornly refused to give ground as many hang on to see whether predicted growth in demand from the batteries sector materialises. 

In the meantime, some producers are seeking to add value to their graphite products in the hope that high-purity material will find acceptance in a market swamped with standard grades.

Supply security

The downtrend in demand for refractories, which remain the single largest consumer application of graphite, has resulted in an increasing surplus of the carbon mineral. Like other refractory minerals, graphite has not yet felt the benefits of a slight recovery in global steelmaking this year and new markets like lithium-ion (Li-ion) batteries are not growing fast enough to absorb oversupply.

China continues to be the world’s largest graphite supplier and the country has given no indication that it is willing to give up its dominant position. In September, China National Nuclear Corp. announced the discovery of what could be China’s largest graphite mine in Inner Mongolia, estimated to contain around 316m tonnes of ore with average carbon content of 5%.

In October, repair work finally started at China Sciences Hengda Graphite Co.’s graphite mine in Yichang, Hubei, where broken pipelines led to the formation of hazardous sink holes in the site’s tailings pond in January 2015. The resulting suspension of mining activity at Hengda has affected the region’s graphite trade, although the supply was not missed by the market.

China’s graphite industry did not escape a government clampdown on pollution this year. Some companies responded to stiffer regulations by swiftly making improvements, although primitive mining and processing techniques still represent a significant encumbrance to the sector’s efficiency. 

Heilongjiang province, one of China’s three main graphite-producing areas, is keen to ensure the local industry expands and is ploughing state funds into new projects and upgrades. 

Yet despite firm indications that Chinese graphite supply is set to outweigh demand for the foreseeable future, exploration companies in other parts of the world insist that conscientious consumers are interested in securing non-Chinese material. Several of these players aim to supply the Li-ion battery sector, which is being driven by growth in electric vehicles (EVs), mobile electronics and energy storage applications.

In order to beat the downturn in the market for standard grades of graphite, existing and prospective producers are investing in technology capable of yielding value-added graphite materials such as micronised, battery-grade and expandable graphites. As well as allowing producers to access higher value markets, investing in high-tech processing gives companies the ability to customise their products to meet the standards required for speciality applications.

Chinese state-owned South Graphite Co. Ltd, the world’s largest supplier of amorphous graphite, announced plans in October to expand output by 200,000 tonnes by the end of 2017. The company intends to set up a new flotation purification facility in Hunan province as it seeks to move away from rough processing towards high-purity products.

In Europe, France-headquartered Imerys SA reported that graphite demand from Li-ion batteries had had a positive impact on its graphite and carbon business in the first three quarters of this year. The production status of Imerys’ Lac des Iles flake graphite mine in Quebec remains unclear, however.

Market demand

Although the overall trend in graphite demand was negative in 2016, there was a partial pickup in enquiries for flake and spherical grades in the second half of the year – marking a slight improvement in Chinese exports of these products compared to the same period in 2015.

In August, Chinese natural flake export volumes rose 42% month-on-month and were 1% higher year-on-year (y-o-y) for January-August.

Flake graphite demand also demonstrated some momentum from October onwards, with producers reporting more active purchasing interest, although much of this was probably due to seasonal buying ahead of winter mine closures in China.

China’s spherical graphite exports for the first eight months of this year reached their highest level since 2012, increasing 19% y-o-y on higher demand from the battery sector. This positive shift failed to lift prices, however, with buyers largely dictating the market on the back of high inventories.

Price 

The supply-heavy graphite market meant that producers were unable to raise offer prices this year, despite higher costs for many, including those Chinese suppliers affected by reduced limits on domestic trucking loads.

Rising demand for spherical graphite was more than offset by oversupply, with prices for the material slipping by 6% y-o-y in January-August.

In the flake graphite segment, prices for low-purity grades (85-87% C and 90% C) of all mesh sizes dropped a couple of times throughout the year, with long flat periods in between declines. 

A similar trend was seen in 94-97% C grades, although the downturn in prices was confined to Q2, after which values remained stable.

Prices for Chinese amorphous graphite were virtually flat for most of the year.

Outlook

At the end of 2016, there was no sign of oversupply in the graphite market disappearing. Until overcapacity is addressed, graphite prices will remain weak.

Demand indications for standard graphite grades do not point to any meaningful rebalancing of the market. For spherical grades, the outlook is more promising, with strong projections for growth in EVs and energy storage, which could make a meaningful dent in supply and ultimately push prices up over the medium-to-long term.

Some market sources have suggested that low prices and ready availability may entice new types of industrial consumers to start using graphite, but at present there is little evidence that the necessary R&D is underway to make this a reality.

 

LITHIUM

2016 was a big year for lithium. Chinese spot prices for lithium compounds began rising in late in 2015 and escalated throughout the first half of this year, attracting the attention of mainstream media and tempting several junior exploration companies to enter the sector. 

Supply Security 

While there have been many new entrants into the lithium exploration industry, the market is currently dominated by a small handful of suppliers – US-based Albemarle Corp. and FMC Corp.; Chile’s Sociedad Quimica y Minera SA (SQM); and the Chinese producers, Tianqi Lithium Industries Inc. and Jianxi Ganfeng Lithium Co.

All of the market leaders have said they will expand their production in the near term, in response to growing lithium demand. 

Albemarle signed a memorandum of understanding (MoU) with the Chilean government in February to increase its lithium carbonate capacity in the Salar de Atacama in northern Chile, from 24,000 tpa to up to 70,000 tpa. A definitive agreement, which was expected in Q1, had still not been reached by late November, with Albemarle blaming Chilean government bureaucracy for the hold up. 

SQM, which also operates out of the Salar de Atacama, tried to block the ramp up on environmental grounds, but later backed down. SQM has had its own internal problems to deal with this year, as a long-running legal battle with state economic body Corporacion de Fomento de la Produccion (CORFO) over rental payments in the Atacama rumbled on. This year saw a number of bidders express interest in buying the company, which observers said may put an end to the dispute.

SQM will begin construction at its Argentinian Cauchari Olaroz project, a joint venture with Lithium Americas Corp., in H1 2017. This will be the company’s first foray outside Chile and suggests that it wants to expand its options in view of its acrimonious relationship with the Chilean state. 

In May, FMC announced it would triple its lithium hydroxide capacity to 30,000 tpa by 2019, prompting some scepticism from the market over its ability to source the requisite volumes of lithium carbonate. These doubts were partly answered in November, when FMC signed a deal with Canadian junior Nemaska Lithium Inc. to buy 8,000 tpa lithium carbonate from 2018. 

Tianqi said in September it would build a 24,000 tpa lithium hydroxide facility in Western Australia, to be fed by spodumene from Talison Lithium Ltd’s operations at Greenbushes, which it shares with Albemarle. 

ASX-listed Orocobre Ltd continued to ramp up its Olaroz facility in Argentina, despite numerous setbacks. In Q3, it achieved its first full quarter of production with output of 3,013 tonnes lithium carbonate.

Two new spodumene producers – Reed Industrial Minerals Ltd (a consortium of China’s Ganfeng and Australian juniors Neometals Ltd and Mineral Resources Ltd) and ASX-listed Galaxy Resources Ltd – were set to enter the market in the final quarter of 2016, with shipments due to leave Australia in November and December, respectively. 

Material from Galaxy’s Mt Cattlin site is to be sold on the open market in China, while Ganfeng will purchase all offtake from Reed’s Mt Marion site. 

Market demand

Predicted and actual lithium demand escalation in 2016 led industry players to speculate that the market may need an additional 20,000 tpa lithium carbonate equivalent (LCE) – the equivalent of one new project every year – for the foreseeable future.

Batteries, which accounted for 35% of global lithium demand in 2015 according to the US Geological Survey (USGS), are expected to drive higher consumption, with volumes demanded by electric vehicles (EVs) and stationary energy storage manufacturing anticipated to grow sharply. 

Traditional uses for lithium, such as ceramics and glass (32% of consumption) and lubricating greases (9%), still make up a healthy demand balance, according to the USGS.

A generous EV subsidy in China drove significant demand from late 2015 through H1 2016, with Chinese spot buyers paying high premiums for prompt deliveries of both lithium carbonate and hydroxide. The government reviewed the policy in the middle of the year, clamping down on allegations of "subsidy cheating", causing demand to drop off, which in turn hit spot prices.

Price trends

By June 2016, Chinese spot prices for lithium carbonate and hydroxide had quadrupled from a year earlier to peaks of almost $30/kg.

The government’s EV subsidies led to six months of inventory building by battery makers up to mid-2016, but the subsequent tightening of the policy stalled buying and led prices to deflate in H2. The trend was exacerbated by some traders deciding to sell off stock because of fears that the arrival of new lithium supply from Australia might cause prices to fall. 

At the time of publication in late November, Chinese spot prices of lithium carbonate and lithium hydroxide were stable at levels of $18-21/kg and $20.5-24/kg, respectively. 

In the rest of the world, annual contract prices for 2017 were being negotiated in Q4. It is expected that contract values will rise significantly from the ranges of $6-7/kg for lithium carbonate and $8-9/kg for lithium hydroxide seen in 2015, but the spread of prices is likely to be wide, with volumes, relationships and end markets determining deals.

Outlook

Suppliers are bullish about increasing lithium demand in the coming years. Increased use of EVs and lithium-ion (Li-ion)-powered large scale energy storage systems are expected to drive battery demand, which Deutche Bank has predicted will grow by a factor of five over the next decade. The bank forecasts lithium carbonate equivalent (LCE) demand to rise from 181,000 tpa in 2015 to 535,000 tpa by 2025.

 

MAGNESIA

Fused magnesia (FM) and deadburned magnesia (DBM) demand and prices continued to struggle in 2016 as a result of the downturn in their main end market, steel refractories. The caustic calcined magnesia (CCM) segment fared better, owing to its diversified applications.  

Just when the industry thought it might be near the bottom, in November China quietly cancelled its magnesia export quotas, which had been in effect since 1994, creating further uncertainty in the market.

Supply security

After a weak but steady first quarter in the magnesia industry, Chinese delegates at IM’s MagMin 2016 Conference in Dusseldorf in May told their international colleagues that the challenges facing FM and DBM markets were as acute in China as they appeared in the rest of the world. CCM producers reported slightly stronger trading conditions, meanwhile, and said that supply could even be tightening.

Industry observers suggested that stricter environmental regulations in China could limit magnesia production, however IM discovered that Liaoning province, the biggest magnesia producing area in the world is unlikely to cut output as it attempts to reverse its declining GDP rate.

In early November, China removed quotas on magnesia exports following a World Trade Organization (WTO) ruling against its quotas on fluorspar and rare earths.

Some market observers predict that Chinese magnesia will flood the international market, while others believe the country’s government will quickly bring in alternative measures, such as production controls and corporate consolidation, as it did with the rare earths sector. 

In the meantime, importers of Chinese magnesia have cancelled orders and plan to wait until 2017 to see how prices move.

Outside China, the largest magnesia companies are attempting to get ahead of Chinese competitors by investing in high quality, value-added products.

In October, Austria’s RHI AG and Brazil’s Magnesita Refratários SA merged to form a global refractories giant. The combined entity will have over 50 facilities globally, with footholds in Europe, the Americas and Asia and direct control over raw materials.

Earlier, in February, Russian manufacturer Magnezit Group and the Ministry of Industry, Energy and Trade of Russia’s Krasnoyarsk Territory signed a cooperation agreement, which will see Magnezit increase FM output in the region from 15,000 tpa to 50,000 tpa.   

In the same month, Netherlands-based Nedmag Industries Mining and Manufacturing BV announced a €122m ($129.6m*) investment programme for 2016-2025, aimed at securing new magnesium salt supply and delivering sustainable innovation.

Difficult market conditions weighed down Turkish magnesia suppliers in 2016. Speaking at MagMin in May, Dr Haris Yiannoulakis, chemical engineer at Grecian Magnesite, said that Turkey has the capacity to produce 100,000 tpa CCM, 570,000 tpa DBM and 40,000 tpa electro-fused magnesia (EFM), for a total of 710,000 tpa magnesia products. But in 2015, actual production was just 478,000 tonnes, representing 67% capacity utilisation. 

In North America, US-based Martin Marietta Materials Inc. reported slight declines in income for its speciality magnesia business this year as US steel production wavered and in South America, Magnesita swung back to a profit of $40.1m for the first nine months of 2016 from a loss of $262.8m a year earlier, but this was mainly due to accounting and currency effects, as Brazil’s steel industry continues to struggle.

But the challenging magnesia market has not deterred some exploration companies from trying to enter the market.

In March, Canada-based West High Yield Resources Ltd, raised Canadian dollar (C$) 5m ($3.7m) to fund the final stages of permitting at its 43m tonne Record Ridge FM project in southern British Columbia and by the middle of the year had embarked upon an environmental study and mine plan.

In May, Australia-listed Jindalee Resources Ltd obtained the Arthur River and Lyons River magnesite deposits in Tasmania, now rechristened as the Prospect Ridge magnesite project. The southern part of Arthur River has a resource estimate of 25m tonnes but the rest of the project is yet to be quantified. The company is currently compiling data on the deposit and has applied for an exploration licence.

In June, Thessally Resources Pty Ltd announced it was assessing the viability of reviving mining operations at the Huandot magnesite deposit in Australia’s Northern Territory to supply CCM to speciality end markets.

ASX-listed Archer Exploration Ltd confirmed in November that material from its 453m tonne magnesite project in South Australia is capable of producing high grade DBM and CCM and planned to commence a bulk processing trial in December.

Market demand

Overcapacity in the magnesia refractories industry has muted the positive effect of a slight recovery in steelmaking on DBM and FM consumption in 2016. Demand for magnesia from the cement and glass refractories sectors has rebounded slightly this year with Chinese government stimulus measures boosting construction and infrastructure investment, but oversupply has acted as a drag on the market.

Strong demand for CCM in niche sectors has delivered pockets of growth, but not enough to raise overall magnesia consumption.

Price trends

Export data show that Chinese magnesia prices fell during 2016. In September, the average export price of FM was down 16% year-on-year (y-o-y) to $469.80/tonne; the CCM price declined 10% y-o-y to $195.10/tonne; and DBM prices were 9% lower y-o-y at $261.66/tonne. 

In the final quarter of the year, Chinese magnesia producers said that higher production costs could push up selling prices but doubted whether buyers would accept increases. Stalemate ensued, with buyers postponing orders until 2017 in the hope that the cancellation of Chinese export quotas will soften prices.

Outlook

The merger between RHI and Magnesita has prompted predictions that the magnesia industry will see further consolidation in the coming years, particularly if the market remains tough for suppliers.

The outlook for steel and refractories is dimmed by the assumption that China has no more stimulus left to inject into its economy and rising steel demand in India will not be enough to offset the Chinese slowdown. 

Uncertainty remains over the impact the removal of Chinese magnesia export quotas will have on the market.

Existing and new western magnesia suppliers are likely to concentrate on CCM and niche, high-value market applications rather than traditional refractory uses. 

 

*All conversions made November 2016