Demand for refractory minerals rises in South Korea

By IM Staff
Published: Thursday, 26 January 2017

Falling prices spur higher silicon carbide, alumina refractory brick imports; magnesite imports stay soft; PMI still below 50 but climbing.

Wayne Yamada

South Korea saw its refractory mineral demand increase in the fourth quarter of 2016 compared with the same period in 2015.

Despite flat steel production, a driver for refractory mineral consumption, South Korea imported more refractory minerals year-on-year (y-o-y) after prices fell at the end of last year.  With South Korea’s manufacturing sector experiencing a recovery, demand for refractory raw materials could be further boosted in 2017.

But different refractory minerals experienced different finishes to the year, with Chinese regulation on magnesia exports delaying purchases as buyers waited for prices to fall further.  For other refractory minerals, import volumes were tightly correlated with prices.

Alumina refractory bricks

South Korea imported 91.2% more high-alumina refractory bricks in Q4 2016 at 23,632 tonnes compared with Q4 2015.  The volume-weighted price fell by 29.7% to $830.24/tonne.  

But the price fall was not consistent with all sellers.  China remained the largest supplier of bricks to South Korea, and Chinese prices rose on average around 14% to $642.92/tonne. China supplied 72.5% of South Korea’s total imports in the fourth quarter.

However, other big exporters slashed prices, with Japan decreasing its December price by 24% y-o-y, which resulted in a 216.5% increase in volumes.  Drastic falls in other countries such as Germany, India, and Malaysia helped to pull the overall price lower.

The port of Busan in South Korea is a major seaport
in the country.  
Calflier001 via flickr 

Silicon carbide

Silicon carbide (SiC) saw a similar pattern to high alumina content bricks, but to a lesser extent. Imports grew by 5.2% quarter-on-quarter to 13,197 tonnes in 2016. Meanwhile, prices fell by 17.4% to $944.95/tonne.

Again China was the largest supplier of SiC and in December, prices fell by 15.4% y-o-y to $787.79/tonne while volumes rose by 22.2% to 4,578 tonnes.  

But in November and October, prices fell on a y-o-y basis without the comparable rise in volumes.  Japan also had mixed fortunes, with two out of the three months resulting in lower volumes and price.  In November, it saw very small gains in prices and volume.

Also for the last three months in 2016, Russia sold South Korea 80 tonnes of SiC a month at $850/tonne, which is likely a single deal for a long-term contract.  In 2015, Russia prices were just under $1,000/tonne for the same total volumes.

Fused and dead burned magnesia

Bucking the trend, fused and dead burned magnesia (FM and DBM), saw a fall in both volumes and prices in Q4. Total South Korean imports were down by 6.9% to 38,720 tonnes while prices also decreased to 8.7% to $368.79/tonne during the fourth quarter 2016.  

China accounted for the largest share of magnesia supply and provided 91.1% of South Korea’s total import volumes.  This market share was flat on the fourth quarter in 2015.

Chinese sellers started the quarter badly, unable to boost volumes even with a reduction in price. However, they saw a reversal in November with a 62.5% y-o-y increase in volumes to 11,735 tonnes with a 17% decrease in prices to $342.98/tonne.  In December, volumes fell by 25.4% to 11,794 tonnes while prices rose 1.7% to $317.13/tonne compared with December 2015.

Second largest supplier Japan also saw mixed results from its price reductions.  However, Japan’s sales prices were nearly double China’s prices, averaging over $600/tonne for the quarter.

Caustic calcined magnesia

Caustic calcined magnesia (CCM) saw a strong correlation between rising prices and lower sales.  Volumes imported into South Korea during the last quarter of 2016 fell by a huge 83.4% y-o-y to 1,146 tonnes.  At the same time, prices soared by 71% to $528.16/tonne.

It is likely that FM, DBM, and CCM volumes all fell in December due to changes in Chinese export policy.

Magnesia buyers previously reduced purchasing because they expected the removal of export quotas and tariffs on the refractory mineral (see p20).

In November, export quotas for magnesia were removed without explanation from the government list released for 2017. Then, just before the end of 2016, the state council of China approved an export tax adjustment on partial products, including the cancellation of export taxes on graphite, magnesia and magnesite.

For FM and DBM, Chinese exports to South Korea fell heavily in December, by 25.4% to 11,794 tonnes compared with the December the previous year.  For CCM, a similar trend was seen when Chinese volumes fell by 69.6% to 402 tonnes in December compared with the same month in 2015.

Going forward, a fall in magnesia prices is likely to result in South Korea increasing its imports of Chinese magnesia in 2017.

South Korea recovering

South Korea’s economy is also recovering slowly, which is expected to result in increased steel production and refractory mineral consumption.

"The end of 2016 showed signs that the South Korean manufacturing sector had come through the worst of its downturn. Both production and new orders declined at weaker rates, while international demand increased for the first time in five months," Amy Bell, economist at Markit, said in a research note published 2 January.

The Nikkei South Korea Manufacturing Purchasing Managers Index (PMI) was 49.4 in December, which still showed the sector contracting, but the rate of contraction was below November’s PMI of 48.0. A PMI below 50 indicates the sector is in recession.