Andalusite facing supply tightness on production issues

By Davide Ghilotti
Published: Friday, 07 July 2017

Heavy rain and flooding hit South Africa and Peru and the weather conditions have halted production in the early months of the year. Market participants claim it will be hard to fulfil contracts. Bauxite buyers who are seeking to shift to andalusite meanwhile compound the availability issues.

The andalusite market is facing a situation of short supply in 2017 following production issues in South Africa and Peru, the two leading origins of the mineral, IM has learnt.
While andalusite has been characterised by broad balance between supply and demand in recent years, the coming months appear to be holding availability issues for customers.

Bad weather conditions brought about temporary production halts in South Africa and Peru, which together account for most of global andalusite supply.

Both countries were hit by heavy rain and flooding, affecting operations in mining areas.

In South Africa, the single largest supplier, mines could not be accessed between December and February. Imerys and Andalusite Resources are the two main producers active in the country.

In Peru, the other leading producer other than South Africa, flooding also took place in the period between February and April, local sources confirmed to IM.

"Production suffered almost three months of stoppage," the Peru-based source told IM. It is understood that over 10,000 tonnes of material could not be produced during the temporary halt of operations.

Suppliers resorted to existing stocks to cover immediate shipments, but inventories are now reported to be completely cleared.

Production has now restarted in both countries, but it is taking time for mines to resume full capacity, while delays have been reported on shipments booked for Q1 and Q2.

A European trader spoke to IM of "an incredible shortage" of andalusite around at the moment, following the weather issues. "There are clear issues in deliveries, and delays in fulfilling contracts," he added.

A consumer of andalusite based in South-east Asia told IM he had managed to have only one container (20 tonnes) of material shipped in May, with delivery expected to take one month.

The consumer was informed by his supplier that some mine facilities were damaged by the flooding and required repair work.

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Prices

IM is currently tracking prices for South African andalusite, 57-858% Al2O3, at a range of €240-290/tonne FOB South Africa, according to assessments on 1 June.

While prices have remained stable over the past months – mainly due to the long-term contracts covering delivery in 2017 – sources maintain that the market may face an upward trend if the supply issues were to persist.

"Prices didn’t change, but that’s only because of ongoing contractual obligations," one trader told IM. "This will come to have an impact."

A second market participant trading in andalusite noted that the euro-rand exchange rate can affect prices once contracts come up for renewal.

"If the [South African] rand strengthens against the euro, export prices will have to be increased accordingly to maintain the seller’s margins," he told IM.

Bauxite buyers turn to andalusite

Additional demand for andalusite volumes is also coming from bauxite consumers who are finding it hard to secure their primary material of choice, IM has learnt.

With bauxite availability getting shorter in China following the closure of mining operations amid the ongoing environmental controls, a number of refractory customers using bauxite are seeking, where possible, to source andalusite in replacement.

"For some specific refractory applications, you can swap bauxite and andalusite. Since bauxite is getting expensive and short, customers are trying to shift to andalusite," the first trader said.

At the same time, it will be hard for these buyers to secure volumes following the andalusite production issues, he added.

Suppliers will be required to cover contracts from their existing customers first, with little left available for further sale to new buyers, IM was told.

A supplier added: "We can see additional demand, either from new customers coming to us or from existing customers asking for higher volumes."

The second European trader said: "It will be impossible to meet even standard demand from ordinary customers, without even taking into account the new demand flow from bauxite buyers."

This article was first published online on 1 June.