TiO2 feedstocks turn a corner

By Kasia Patel, Cameron Perks
Published: Wednesday, 22 February 2017

A rebound in titanium dioxide prices and demand has paved the way for positive momentum in the mineral sands sector. Kasia Patel, North American Editor, and Cameron Perks, IM Correspondent, look at current industry trends and planned new projects in the sector.

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India’s leading producer, V.V. Mineral, is planning to expand feedstock production in the country as prices continue to rise. (Source: V.V. Minerals)


Mineral sands market players have been tentatively predicting a sustained improvement in the market for the last couple of years. But, while end users have seen increased demand seasonally for some time now, improvements first seen in paints and coatings and then in titanium dioxide (TiO2) have failed to trickle down to feedstock producers owing to an imbalance in the market, which experienced a continued period of oversupply. 

However, recent support for higher ilmenite and rutile prices indicates that the sector may have finally turned a corner, as TiO2 manufacturers operate at higher capacities and the market for both pigments and feedstocks continues to tightening.

Major production

Mineral sands fall under two main categories, zircon and TiO2 feedstocks, which include a number of products such as rutile, chloride and sulphate ilmenite and leucoxene. Ilmenite processing also results in higher grade TiO2 feedstocks such as synthetic rutile and slag.

Zircon is primarily used in the production of ceramic tiles, in addition to refractories and speciality applications in the form of zirconia and zirconium chemicals for use in end markets such as nuclear fuel rods, catalytic converters and water purification systems.

Zircon reserves are estimated at a total of 78m tonnes, with 51m tonnes located in Australia and 14m tonnes in South Africa. According to US Geological Survey (USGS) figures, 2015 production (2016 figures were not yet available at time of publication) reflected reserve locations, with Australia leading output at 500,000 tonnes, followed by South Africa with 380,000 tonnes. China accounted for 140,000 tonnes in 2015; Indonesia with 110,000 tonnes, the US for 60,000 tonnes; Mozambique for 50,000 tonnes and India with 40,000 tonnes.

TiO2 feedstocks meanwhile are mined mainly as ilmenite and rutile, and to a lesser extent leucoxene. These usually contain between 50% TiO2 content (for sulphate ilmenite) up to 95% TiO2 content (for natural rutile). 

The main end use for TiO2 feedstocks, accounting for 80-90% of production, is pigment manufacturing for consumption in paints, paper and plastics. The remainder of TiO2 feedstocks are consumed in titanium metal markets and welding flux.

Ilmenite production in 2015, which overall totalled 5.6m tonnes, was led by China, according to the USGS, at 900,000 tonnes, followed by Australia with 720,000 tonnes, Vietnam with 540,000 tonnes, South Africa with 480,000 tonnes and Mozambique with 450,000 tonnes.

Rutile production meanwhile at 480,000 tonnes excluding US production, was dominated by Australia with 144,000 tonnes and Sierra Leone with 110,000 tonnes. 

Changes in the feedstock sector

The difference between the production methods of TiO2 – chloride route and sulphate route – determines the feedstock used by a pigment manufacturer, and changes in process technology trends will impact raw material demand for various grades of rutile and ilmenite.

Feedstocks used for the sulphate process include lower grade ilmenite and sulphate ore slag, while the chloride process utilises rutile, synthetic rutile and chlorinadable slag. 

Global output is currently led by sulphate route technology – reflecting the recent strengthening particularly in sulphate ilmenite prices – in part owing to China’s growing role in the sector, as currently only four of China’s 42 TiO2 producers have the capacity to produce chloride route TiO2.

However, as China adopts more chloride-route technology in preference to sulphate plants there will be another cross over sometime in the next 10 years, once again changing the consumption for feedstocks.  

While consolidation in the pigments industry has been widespread, major changes to the supply of mineral sands have been comparatively less prominent, with oversupply issues being addressed mainly by existing producers taking capacity temporarily offline. 

In December, Sibelco Australia told IM that the company had decided to reverse its decision to halt mineral sands mining at its Stradbroke Island site in Queensland for the following three months due to improving demand. The company was initially planning to restructure its Stradbroke Island mineral sand mining operations ahead of the Queensland Government’s mining phase-out planned for 2019. However the plan was scrapped as demand for ilmenite and rutile improved due to re-stocking from TiO2 producers. Despite the decision, the company has only three years of mining left at the facility, as the Queensland government has committed to ending mining activities in the North Stradbroke Island region by 2019.

Other supply changes which have helped to rebalance the market include the shuttering of IRC Ltd’s Kuranakh mine in late 2015, which produced 144,005 tpa ilmenite. Meanwhile Australia’s Queensland Goondicum mineral sand deposit was restarted in April 2015 by Melior Resources, but shortly thereafter shut down in August of 2015.

Iluka-Sierra Rutile takeover

More recently, a major change likely to shake-up the mineral sands landscape is the takeover of Sierra Leone-based Sierra Rutile Ltd by leading producer Iluka Resources. The merger was completed in December 2016 for Australian dollar (A$) 393m ($293m). During the process, Iluka said it planned to evaluate potential development routes at Sierra Rutile through definitive feasibility studies on various options. 

Production expansion options at Sierra Rutile’s mineral sands operation in Sierra Leone include a larger expansion at the Lanti dry mining operation to 500 tph instead of 250 tpa of ore throughput; a similar, larger expansion at the Gangama dry mining facility; and the development of a new group of deposits with around 1,000 tph throughput.

The expansions at Lanti and Gangama would increase rutile production from an estimated 135,000-145,000 tonnes in 2016 to 160,000-175,000 tpa. An expansion at Sembehun could increase production in excess of 240,000 tpa.

While Iluka has concluded mining in the Murray Basin, located in the Eastern half of Australia, its concentrate stockpiles continue to be the company’s primary source of rutile. Because of this, the company’s rutile production was around 20% lower than last year. The company will continue to process existing concentrate from the Murray Basin this year.

Similarly, mining and concentrating remain idle at Iluka’s South Australia Jacinth Ambrosia operation, with stockpiled concentrate to be processed throughout the coming year.
 Iluka map of operations
Iluka's operations in Murray Basin (source Iluka)


Iluka’s Tutunup Mine will continue to run at 100% utilisation throughout 2017, and is the primary source of ilmenite being fed to the company’s SR 2 kiln. The kiln, which operated at 100% utilisation through 2016, produced 211,000 tonnes synthetic rutile.

The Tutunup mine is now the only mining operation currently being conducted by Iluka. This may change soon however, as the company mulls over the possibility of starting up its Western Australian Cataby mine. While board approval is still required in order to go ahead with the commissioning of Cataby, Iluka has factored it into their 2017 capital costs by assuming its commitment.

Cataby is planned to produce ilmenite suitable for sale, or as a feed source for synthetic production. In addition, Iluka has said that Cataby will produce "Material volumes of zircon and rutile".

Other deposits earmarked for commissioning include Balranald, located in the state of NSW, Australia, as well as Puttulam, Sri Lanka. Balranald is an advanced project rich in rutile, and has been the long-term subject of trialing 'unconventional’ mining techniques, while Puttalam is sulphite-ilmenite rich and is currently undergoing a pre-feasibility study.

While the Balranald deposit was previously being considered for, and was approved to carry out conventional mining, the company has now moved away from this, committing to developing its unconventional underground mining technique.

New developments in Australia

Also in Australia, Sheffield Resources has continued to undertake a bankable feasibility study (BFS) on its Western Australian Thunderbird deposit. While the large deposit is known for its substantial zircon content, the company plans to also produce substantial amounts of high grade sulphate ilmenite, as well as lower grade titanium dioxide source material, known as HiTi or leucoxene. 

Thunderbird project location Sheffield Resources 
Thunderbird location in Western Australia (Source: Sheffield Resources)


The company is anticipating 2017 as the year that construction will begin at Thunderbird. Once in production, the proposed processing rate of 7.5m tpa will be carried out from years 1 – 5 and then at 15m tpa from year 5 onwards.  A total of 685.6m tonnes of ore is to be mined over the deposit’s lifetime.

Others have also be been spurred on by increasing TiO2 feedstock prices. Image Resources has doubled its mineral resource tonnages for its Boonanarring Project as part of its own BFS. The Boonanarring project, located North of Perth in Western Australia, has 43.7m tonnes of ore, with 5.6% heavy minerals. Of the 5.6%, zircon makes up 18.1%, rutile 2.6%, leucoxene 2.2% and ilmenite 49.1%. 

MZI Resources ramped up production of its leucoxene and zircon in the final 2016 quarter, achieving design heavy mineral concentrate recoveries and grades at its concentration plant. The company announced a 17% increase in quarterly saleable production, but said that mining volumes were 12% lower in the December quarter compared to previous quarter. 

MZI noted that "pigment producers are now seeing improvement in both volume and price" which is in turn depleting global inventory. MZI states that "Chinese producers have been most aggressive announcing 13 rounds of price increases in 2016".

The company added that a "strong painting season" in the northern hemisphere would  place "considerable pressure on high TiO2 feedstock prices in 2017" and that chloride pigment demand is expected to force chloride pigment producers to "increase production by either restarting idled capacity or utilising higher grade feedstock to increase yield".

Diatreme Resources meanwhile has also been pushing to develop its Cyclone Zircon Project in Western Australia. The company has recently acquired final environmental consent for the development of the project, meaning that Diatreme can now focus on "discussions with project partners, potential funders, and potential product off takers for direct project participation."

Positivity in TiO2 to drive feedstocks

TiO2 prices began to see a recovery in the second half of 2016, thanks to which some mineral sands prices have also seen an uptick, particularly sulphate ilmenite and rutile. 

CFR Asia TiO2 prices now range from $2,400 to $2,600/tonne, with one Chinese supplier telling IM at the start of February that prices in the country were averaging at around $2,500-2,600/tonne, with lower ranges at $2,400 for anatase grades.

"The buying price of TiO2 has also increased in Europe," the producer said. "But European buyers are also saying that the Chinese price to Europe is higher than the European price from some major companies."

Both Western and Chinese producers announced price increases towards the end of 2016, which were implemented at the start of this year – although according to some sources not in their entirety – with more expected in the second quarter of the year.

At the time of publishing, Chemours had announced an additional price increase for all of its Ti-Pure TiO2 products effective 1 March 2017 or as contracts allow.

TiO2 grades sold in North America will increase by $0.06/lb, while the price for Ti-Pure grades sold in Asia Pacific will see an increase of $150/tonne. In Latin America, the Middle East, Eastern Europe and Sub-Saharan Africa prices will see a net increase of $200/tonne. A net price increase of €200/tonne will also apply for Ti-Pure grades sold in Western and Central Europe, Turkey and North Africa. 

Chemours’ price announcement was quickly followed by similar notices from other major producers such as Huntsman Corp. and Cristal.

"We will see if the price increases will lend themselves to the market and if they do with the Western producers then the Chinese price is likely to go up again," the Chinese seller noted. 

While it has taken a couple of years, the trickle-down effect of high paint and coatings output has finally made its way down to TiO2 and manifested itself in higher prices for mineral sands.

However, the Chinese source warned that higher TiO2 prices – and mineral sands demand – hinge on this high output from their end consumers.

"Coatings producers keep manufacturing at high rates, but if they limited their output demand would drop suddenly," he told IM. "There were a lot of coatings plants closures in China in 2016 and especially towards the end of the year, so it still remains to be seen what effect this will have on TiO2 demand and pricing."

Concerns have also been expressed by market participants of a TiO2 supply shortage, with one European buyer noting that lead times were getting longer for TiO2 deliveries.

"There has been no change right now, but there are already indications that price increases will be seen in Q2," the European buyer said. "We are currently in talks with suppliers negotiating prices for Q2 and have been notified that lead times are increasing. We’re now looking at a 60 day lead time for any supply because of a tightening in the market."

Mineral sands pricing trends

Ilmenite

Prices for ilmenite, CIF China (min 54%) were reported at $140-180/tonne in the first couple of weeks of February, according to the IM Pricing Database, having started seeing an increase in mid-2016.

Sulphate ilmenite prices have seen a stronger increase than chloride ilmenite prices, although these have also seen some movement according to some IM pricing contacts, with rises anticipated.

One chloride ilmenite producer noted that while sulphate ilmenite prices have seen a large rebound, chloride ilmenite prices have remained relatively flat owing to the other options available for chloride TiO2 producers. 

Ilmenite prices, bulk concentrates, 54% TiO2, CIF China 
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Source: Industrial Minerals 

The supplier however pointed to tightening in the TiO2 market, noting that the lack of additional TiO2 supply coming online was likely to support higher chloride ilmenite prices. The producer also pointed to the recent Iluka/Sierra Rutile merger as a potential factor that could push up both high grade ilmenite and rutile prices in the near future.

"Iluka is a price leader and likely to be disciplined in that. If rutile prices go up then customers could turn more to chloride ilmenite," the producer added.

ASX-listed Mineral Commodities Ltd (MRC) – which produces mineral sands from its South African operations – also predicted that momentum in ilmenite prices would continue, after the company announced the signing of new contracts for the sale of up to 83,000 tonnes ilmenite in the first quarter of 2017 to Chinese buyers. 

"There is an evident increasing demand for ilmenite concentrate and finished ilmenite products due to a combination of the tightening of global ilmenite production within China and India, due to environmental and economic cost of production factors," the company said, adding that the price for its ilmenite concentrate products had strengthened in Q4 2016. 

Rutile

In its most recent market update, Iluka predicted an increase in rutile prices of up to 4% in the first half of 2017 as a result of the dramatic improvement in market conditions for pigments, creating a favourable environment for feedstocks, particularly rutile and synthetic rutile.

Rutile concentrate min 95% TiO2 large volumes for pigment FOB Australia 
US $ per tonne 
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Source: Industrial Minerals 

The drawing down of pigment inventories below seasonal norms, normalising of plant capacity utilisation and the success of pricing increases for Western chloride pigment producers were all listed as positive drivers for high grade ores.

According to the IM Pricing Database, at the start of February, rutile concentrate prices (min 95%) for TiO2 large volumes for pigment on an FOB Australia basis stood at between $710-770/tonne, while bagged rutile concentrate (min 95%) on an FOB Australia basis varied between $770 and $850/tonne.

"There are positive fundamentals in the rutile industry," another producer told IM at the start of January. "Last year pigment producers increased prices because they were going to go broke and they had to, but then these increases started to be supported by higher demand."

According to the producer, restocking is continuing to occur with pigment producers, who are running low inventories and finished 2016 at low capital and inventory levels, which has caused tightness in the feedstock market.

"This is demonstrated by the fact that when feedstock shipments are delayed, producers are looking to the spot market for feedstocks," the supplier said, adding that these market fundamentals are expected to strengthen and support further price increases in the future. "I’ve spoken to people who have been in the industry for years and this is the only time they can remember that inventories were down or stagnant for two winters in a row." 

Rutile prices,  95% TiO2 bagged, FOB Australia 
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Source: Industrial Minerals 

Zircon

Zircon prices have also seen a slight uptick after bottoming out in mid-2016. Although the price of zircon fell by around $160/tonne in the first half of the year according to Iluka, the company raised its zircon prices by $60/tonne in the third quarter of 2016 – the first increase for the company in several years.

In its quarterly production report, Iluka advised customers that the company would be increasing its zircon prices by $50/tonne from 15 February, having already secured volumes at higher prices in Q1.

While the company noted that demand for the mineral was varied across different geographies at the end of 2016, it added that "there was a material destocking of the producer supply chain over the course of 2016, with market information that some zircon suppliers had fully committed their volumes or were having difficulties in filling some customer orders". As such, the company expects positive momentum to continue in demand and pricing. 

"Subject to global economic settings and restoration of confidence in some downstream sectors, the demand outlook for zircon in 2017 and 2018 is for moderate growth," the company said. "This will also be a period during which industry participants will be required to make critical decisions on the commitment of significant capital necessary to maintain and replenish existing supply."

In January this year, mineral sands producers MRC and Base Resources also noted a modest increase in zircon prices in the last quarter of 2016, with Base Resources predicting "ongoing upward momentum in zircon prices through 2017". 

One zircon producer pointed to dwindling supply on the market, higher demand for the mineral in India and lower stockpiles in China as factors pushing up pricing.

"[The higher prices are] due to the enigma that there is a diminishing production of zircon as very few of the big players are producing the same amount of zircon as they were previously producing," the source told IM

"In addition, the Indian market has strengthened, taking up any surplus zircon and at better pricing. Furthermore, stockpiles of zircon concentrate in warehouses in China have also diminished. Effectively what you have seen is a rebalancing of the supply/demand chain," the source added. 

Expanding in India

A number of producers have noted the strengthening of ilmenite prices from India, and India’s largest producer, V.V. Mineral confirmed its ilmenite prices were increasing in line with global price rises. 

"China seems to be the key driver for this. China has more than 50 TiO2 production plants, almost all (except two plants) are sulphate-based units. Their market is picking up, therefore the TiO2 production, therefore the ilmenite requirement and therefore the sulphate ilmenite price increase," the company’s director, V. Subramanian, told IM, adding that currently he sees a balanced market for rutile and ilmenite, rather than the oversupply situation seen previously. 

The company produces rutile, zircon and four grades of ilmenite, producing around 350,000-400,000 tonnes ilmenite a year depending on market conditions, Subramanian said. While the move by China to produce increased amounts of chloride-grade TiO2 is a threat to chloride-grade TiO2 producers outside of China, Subramanian does not expect sulphate ilmenite demand to be greatly impacted.

For zircon, Subramanian noted that the price in India previously saw a "slight reduction" but has been stable for the past few months, seeing neither a decline nor increase in 2017.

Rather, the biggest challenges to Indian producers lie in unfavourable government policies, he said, pointing to the recently imposed export duty of 10% for ilmenite according to the Atomic Mineral Concession Rule (AMCR) and the discontinued anti-dumping duty for TiO2 pigment. 

However, despite these difficulties, Subramanian said the company is looking to expand its production.

"V.V. Mineral is planning to expand in other states of India from Tamil Nadu and Andra Pradesh where we are currently operating. We also looking for mining opportunities in neighbouring countries," he told IM.

Mineral sands investment to continue

The positivity seen in pigments and the resulting uplift in the mineral sands industry is likely to facilitate continued investment into new mining projects, demonstrating that the sector may have well and truly turned a corner. 

According to financial advisor Hannam &Partners LLP, more financial funds could invest in mineral sands mining projects as the sector outperformed other commodities towards the end of 2016.

"Everyone else is struggling to make profit in the last quarter, [but] the mineral sand producers outperform the rest of the sectors," Ingo Hofmaier, a partner at the firm, said at the TZMI congress held in Hong Kong in November. According to Hofmaier, shareholder return from the top five mineral sands producers – Iluka, Tronox, Kenmare Resources and Sierra Rutile – increased by 54%, compared with the 38% increase in copper returns. 

He added that the upswing in prices for ilmenite, rutile and zircon was likely to run for the next couple of years, noting that brokers such as Deutsche Bank, Macquarie, Credit Suisse, UBS, JP Morgan, Canaccord and Mirabaud have all forecast a market recovery and price increases in rutile, ilmenite and TiO2.

Meanwhile, the expectation by both buyers and producers of TiO2 and its feedstocks that prices will continue to rise paves the way for a future where additional price increases are likely to be more easily accepted on the market.

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