|During the initial stages of iodine
production, the caliche is blasted
before being moved to leaching piles.
In March 2011, Japan was hit by the most powerful earthquake
in its recorded history. The tremor, coupled with ensuing
tsunamis measuring up to and over 40 metres, wreaked havoc.
Nearly 16,000 people were killed, over 6,000 injured and over
2,500 remain missing, according to police reports.
Property was destroyed, infrastructure crippled and
utilities cut off across the country. A nuclear plant at
Fukushima went into meltdown. The Prime Minister, Naoto Kan,
described the incident as "the toughest and the most difficult
crisis" the country had faced since the Second World
Amidst the chaos, the price of iodine – a mineral
used in healthcare, nutrition and industry – rocketed.
As a result of the fallout from the earthquake, output from
Japan, the world’s number two producer, was
severely restricted, while demand for potassium iodide, which
protects the body from radiation poisoning, was pushed up. And
as the market grew tight, the price responded with stark
elasticity, growing from a range of $32-34/kg (iodine crystal,
99.5% min, spot and contract) in early March to $60-95/kg by
late June (see Figure 1) 2011.
|Figure 1: Iodine crystal, crystal, 99.5% min,
spot and contract, $/kg
Today, the price of iodine sits around $20/kg, a staggering
drop from its 2011 highs. But just as supply and demand factors
can cause price to soar, so they can cause it to plummet.
In an oligopolistic market like iodine, dominated by a small
number of suppliers, changes in supply levels can affect the
market drastically, causing sharp and immediate effects to
the price of the mineral, as illustrated by the peaks and
troughs seen over the course of the last five years.
Before the storm
In the half-decade from 2006 to 2011, iodine prices
experienced relatively stable growth, increasing from $22/kg to
$34/kg, driven by rising demand from China.
Globally, people had money in their pockets. Health
insurance companies pushed for greater numbers of scans (iodine
is used in x-ray contrast media) and the use of liquid crystal
display, or LCD, screens for high definition televisions and
touchscreen devices grew.
In each of these cases, the cost of iodine was a minimal
part of the overall goods, so manufacturers paid little
attention to the cost of the mineral. Producers enjoyed their
days in the sun and prices rose gradually.
"The market was healthy, good for producers. It was stable,"
notes a salesman at one major producing company.
In 2011, however, the shock of the Japanese Tohuku
earthquake limiting Japanese production, coupled with an
environmentally-driven cut to the supply levels of Cosayach SA,
Chile’s number two player (the company had to
shutter two wells, reducing its production from 4,500 tpa to
2,500 tpa), combined to slash production, in turn driving
prices as high as $95/kg in a matter of months.
The restricted production was bound to drive up price. But
this time it was accentuated by the sudden and unexpected
nature, as well as the scale, of events. This hit the market
hard and producers drove up prices – within three
months, they were up 135% at the midpoint.
"Customers aren’t shy of kicking you on the
ground. Producers and distributors at this point said, 'The
shoe’s on the other foot’," notes Rob
Moss, managing director of Landsdowne Chemicals, a UK-based
iodine distributor. "If you don’t take advantage
of it, you’re not doing your job are you?"
Customers were willing to pay whatever was required. "The
market was so scarce, we could sell all production,
regardless of quality," notes one producer.
The elevated price level brought producers flocking.
Existing players pushed up production and new ones entered the
As in an under-eights football match, where 22 children
chase the ball around the park, without regard to longer term
strategy and positioning, so iodine producers chased the high
Chile’s number three player, ACF Minera SA, was
already looking at expanding, and
its owners, the Urruticoechea family, seized the opportunity.
Through a partnership deal with Japan’s Toyota
Tsusho, they created a new venture, Algorta Norte SA, which
began shipping product in mid-2012, ultimately adding a
further 4,000 tpa to the market.
Sociedad Quimica y Minera SA (SQM), the world’s
largest producer, expanded the capacity at its Nueva Victoria
site in 2013 and has been increasing production since.
Cosayach would later bring full production back online, at
higher levels than before, with the addition of a pipeline, and
Japan’s producers also eventually returned to the
|The 2011 Tohuku earthquake in Japan
devastation and drove up the price of iodine.
|The leaching of the caliche allows brine
to be pumped from the piles for processing.
With the market saturated with product, the price quickly
started to drop.
This was simply a "consequence of the oversupply generated
due to the increased installed capacity following the iodine
price increase in 2011", says Daniel Jiménez, vice
president for iodine, lithium and industrial chemicals at
"When you add big volumes onto a market that’s
not really tight in the first place, it’s going to
respond," notes another player.
There was also an element of less-than-expected growth in
the market. Predicted demand for methyl iodide as a replacement
for methyl bromide in the crop fumigation and field
sterilisation never materialised. A global recession pushed
down demand for x-ray contrast media and flat screen
"The correction was pretty rapid. Price fell pretty fast. In
certain places it was brutal," says Moss.
Throughout 2012 and 2013, prices remained high. But by early
2014 they had dropped to $45-55/kg and continued falling
quickly. In early 2015, they were at $31-37/kg, approaching
pre-earthquake levels. But at this point
Cosayach’s production hit 5,000 tpa and the
decline continued apace.
At the start of 2016 prices were at $27-30/kg. By the
beginning of this year, they had fallen below $20/kg in some
"Who’s to blame? I don’t think the
customer. Sure you can say they pushed down the price. But if
they see a half open door they’ll put their foot
in it. We did it when prices were going up, why
shouldn’t they do it when they’re
going down?" says Moss.
An astute observer could reasonably ask why the producers, as
the price continued to fall amidst a saturated market,
didn’t just stop adding supply, or perhaps
reduce it slightly.
Part of the problem was a blinkered focus on market share
from the main suppliers, engaged in a price war to outdo each
other on this metric at any cost.
"Recovering share of the market was more important than
price," says one producer.
"Cosayach and SQM had this tit-for-tat nonsense. Cosayach
would push prices down, and SQM would respond," notes one
player, describing the interactions as "macho behaviour".
SQM especially has not been shy about proclaiming its plans
for increasing its market share. In 2012 it had a global market
share of 34%, though this slipped to 28% the following year as
Algorta Norte came online. The company has been keen to regain
its previous heights.
It wants to increase its sales volumes so that they are on
par with increased production rates. "We have been seeking to
increase our volumes to the level our nitrates and iodine sales
are balanced with our production," explains Jiménez. "We
estimate that this balance would be reached at a market share
of approximately one third, which is close to our current
market share in the iodine business," he adds.
One offshoot of the low price dynamic was that it had the
potential to push out smaller players from the market, which
without the firepower and diversity of their larger rivals,
couldn’t survive as unit sales price approached
Sure enough, SCM Bullmine SA ceased operations in 2015 and
Eloisa SpA mothballed its plant before it reached production.
Atacama Minerals Chile SCM continues to produce iodine although
its owner, Quebec-based RB Energy Inc. has entered
Whether this makes the tactics of the larger players
predatory is a different question. "Price levels are the
consequence of the prevailing supply-demand balance," insists
Jiménez, noting that in a highly competitive market like
iodine "prices will be not what somebody would want them to be
but, where the equilibrium between supply and demand is
He accepts however that current market conditions "will
certainly represent a challenge for all producers, and
particularly the highest cost producers".
|Iodine use is growing in a range of end
markets, most notably
x-ray contrast media, where it is used to enhance
visibility in scans.
With the cost of producing iodine in Chile around $15-17/kg,
according to industry participants, the dipping of prices
below $20/kg, as happened in late 2016 caused companies to
Financial statements published by the Chilean securities and
insurance regulator (SVS) show both Algorta Norte and Atacama
Minerals were in 2016 producing at levels where costs
It got to the stage where "the game wasn’t fun
anymore," according to one producer.
With profits at minimal or non-existent levels, reinvestment
becomes a luxury many cannot afford, which observers worry may
leave maintenance work undone, and lead to problems further
down the road.
Unwilling to sell below cost, two of the influential
players, Cosayach and ACF, bowed out of the standoff, slashing
production in the first quarter of 2017. Cosayach will reduce
production to 3,500 tonnes in 2017, down from 5,000 tpa
previously. It is unclear what ACF’s production
plans are, but it has reportedly laid off the entire mining
staff at its Lagunas operation.
In both March and April Chile’s exports of
iodine fell by 400 tonnes on the previous year.
The lower production outlook for the 2017 calendar year has
had a positive effect on prices, with stability and perhaps a
slight uptick the market’s response.
"Prices appear to have stabilised, or at least stopped
dropping during Q2," notes SQM’s
How long will supply reductions last remains to be seen.
Some players have questioned whether these are long term or
just temporary measures.
The trend in pricing nonetheless appears to be an upward
one. Even prices in India, traditionally a dumping ground for
iodine, appear to be edging up from the particularly low levels
of around $18.50/tonne seen in recent times.
Tom Becker, CEO of US-based producer Iofina Chemical Plc,
notes that "we have seen prices in H1 2017 slightly higher than
late 2016 and, while not certain, we believe that iodine prices
are more likely to move higher".
But much depends on the continuity of the supply changes in
Chile. "It probably isn’t wise for me to make
guesses as to how the Chilean suppliers will manage their
production," says Becker.
For those companies that have stayed the course to now, cost
reduction has proved key.
Becker notes that over the past two years Iofina has made
cost reduction at existing production facilities a priority,
rather than adding extra facilities.
He adds: "We are now considering options to manufacture
iodine at an additional site which, when executed, must reduce
our overall cost of production."
SQM is thought to have the lowest cost position in the
market. But it too has put considerable effort into reducing
costs, bringing its unit production cost down significantly
over the past number of years.
It has also been aided by its diversity, with potassium
nitrate and lithium sales going strong, something that stood in
good stead as the iodine selling price fell.
Cosayach this year has also made a move into potassium
nitrate. The company is seeking to diversify by reactivating
nitrates production (nitrates are a by-product of iodine,
both coming from caliche ore), which had been offline for a
number of years. This will be mixed with potash shipped in
from abroad to create potassium nitrate, a product with a
market in significantly better shape than iodine.
The other contender
Japan is a somewhat different beast from Chile. The Japanese
produce at closer to $12/kg as a by-product of gas.
"There is no drilling or mining. Just pump the water out,
extract the iodine and pump it back," says one
According to the US Geological Survey (USGS), Japan has
identified reserves of almost 5m tonnes iodine, almost three
times that of Chile.
But environmental issues prevent the Japanese from
dominating the market. The pumping of iodine out of brine
fields causes coastal erosion and shifts in the seabed as the
coastline fills the void left by the removed brine and
underwater landslides drag chunks of land from the
On top of this, for every cubic metre of brine pumped out,
an equivalent volume of seawater has to be pumped back in,
diluting the material and further limiting
As a result, despite sizeable reserves, the quantity Japan is
able to produce is very low.
The environmental restrictions have, however, led the
Japanese to do a measure of recycling of iodine, something the
Chileans have not shown much interest in, due to their lack of
production restrictions. A measure of recycling is also carried
out in Europe, India and America.
Recycled iodine provided about 6,000 tonnes to the market,
or 18%, in 2015, according to the World Iodine Association
(WIA). Half of this came from chemical synthesis, where iodine
is used as an intermediate. The rest came largely from
recoverable waste created in the production of LCD screens and,
to a lesser extent, x-ray contrast media.
The WIA expects the market share occupied by recycling to
continue to increase moderately over the coming years, driven
by regulatory restrictions and a growing concern for
sustainability of production processes. It is unlikely to
account for more than 20% of market share any time soon,
A growing market
Estimates by major producers put the size of the global
iodine market at around 33,000 tonnes in 2016.
Chile dominates global iodine production, accounting for
about 58%, or 19,000 tonnes, of this. Japan, in second place
produced a further 10,000 tonnes. And the US, in third,
contributed about 2,000 tonnes.
The overall market is expected to grow by around 2% in 2017,
largely driven by growth in Asia, especially China, whereas
North America and Europe are very stable, notes WIA president,
The body predicts a demand growth rate of 2-3% will continue
over the next 3 years. This should remain relatively stable and
constant, with most of the industries into which iodine flows
– medicine, disinfectants, biocides – not
particularly dependant on economic cycles.
SQM predicts around 800 more tonnes being needed by the
market this year, while other more bullish participants quote
numbers as high as 1,500 tonnes. This depends very much on what
happens to demand within the individual segments of the market,
notably in x-ray contrast media.
Demand for x-ray contrast media is leading market growth as
healthcare improves in the developing world.
In industrial markets there is some growth in biocides. In
paints, for example, iodine is making some inroads pushing out
bromine, which is seen as being harmful. Continuation of this
trend depends however on the price of iodine remaining low. If
iodine doubles in price it is likely consumers will go back to
There has been an increasing volume of iodine imported into
China in recent years, though market players have indicated
they often "lose sight" of material as it enters the country,
given the sprawling network of middle men and
The assumption is that this material is a result of shifting
manufacturing of LCD technology from Japan and Korea to
China. This theory is backed up by increased Japanese
The industry is keen to explore new end markets for the
mineral. Smith notes that the WIA is actively encouraging the
emergence of new uses, while Iofina’s Becker says
his company is researching new iodine-based products.
The price dynamic of recent years notwithstanding, optimism
for the future abounds.
"We are confident that with prices showing some more
stability, the industry may regain confidence in building up
inventories and developing new projects," says Smith.
Blast, Pump, Drip: Creating Iodine
In Chile, iodine is created from brines drained from caliche
in the country’s arid north.
The process begins with the clearing of desert terrain and
blasting of the caliche before moving it to form a leaching
pile. Irrigation and drainage systems are installed in the
leaching piles. The leaching process of washing the caliche
then allows a liquid solution, or brine, containing nitrates
and iodine, to pass through the pipes.
From here, the brine is pumped towards the processing
location. It is stored in large pools and pumped to an
absorption tower where it is mixed with a gaseous form of
sulphur dioxide (created in a rotating oven). The mix of brine
injected with gaseous sulphur dioxide forms iodide. The iodide
is pumped into a reactor, which is connected with two other
lines that pump in brine from the pools and sodium
In the processing plant the solution is mixed with kerosene
to separate the iodine from the rest of the brine. It then
passes through a concentration system, where a high
concentration iodide is obtained and sent to a conditioning
process, which in turn cleans it of all its impurities and
allows it to enter its final stage: iodine with 99.9%
However, at this point the iodine is still in liquid form. So
it is sent to so-called prill towers, where it arrives into
prill pod containers, repositories with hundreds of small
holes. From these containers, the liquid iodine is dripped
down, solidifying during the fall.
The final product is crystallised, high purity iodine.
Iodine-based biocides are used in paints, adhesives, wood
treatment and fluids for metallurgy.
Liquid crystal displays, such as those in HD televisions and
touchscreen technology, make use of two sheets of polarising
material with a "liquid crystal" solution between them.
Iodine is a key component in the polarising films.
Iodine is important in the prevention of goitre, thyroid
malfunction and cretinism, as well as growth defects in
foetuses. In order to ensure people get their recommended
intake, salt is iodised all over the word.
Iodine is used as a raw material for x-ray contrast media,
enhancing visibility during various bodily scans. It is also
used in antiseptics, anti-radiation pills and as an active
ingredient in various other pharmaceutical products,
including antispasmodics, coronary vasodilators and
neuromuscular blocking agents.