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Anettelinnea |
Over the past two years, the worldwide fluorspar market has
seen a great deal of uncertainty. Prices have edged slowly
lower and volumes have dropped, while the supply mix has
shifted as large producers reduce output and new suppliers,
such as those in Vietnam, have started to increase
production.
Fluorspar (CaF2) is an essential raw material in the
chemical, steel and aluminium industries, as well as in a
growing number of high-tech green technologies. It is
irreplaceable in the markets it serves, although some
substitutes have been tested in recent years.
The market is essentially divided into two sectors:
metallurgical (and ceramic) grade fluorspar (metspar), with a
CaF2 content of 80-94%, and acid grade fluorspar (acidspar),
containing 95-97% CaF2.
Other grades include welding grade, with >97% CaF2
content and sub-metallurgical grade, <80% CaF2.
Metspar is primarily sold as a flux into markets for iron
and steel casting, and steelmaking. It accounts for around 40%
of fluorspar demand.
Acidspar is the raw material for hydrofluoric acid (HF) and
thus for all fluorochemicals, in addition to being an important
feedstock for aluminium fluoride (AlF3) and other markets (such
as welding rods). It accounts for around 60% of demand.
The world’s identified resources of fluorspar
amount to approximately 500m tonnes contained, according to the
US Geological Survey (USGS). However, if reserves of fluorine
present in phosphate rock are also considered, this adds a
further 1.1bn tonnes fluorspar ore – which at 3.5%
fluorine would contain about 79m tonnes fluorspar. In addition,
world reserves of phosphate rock are estimated to be 67bn
tonnes, equivalent to about 4.8bn tonnes of 100% fluorspar
equivalent.
South Africa holds the largest share of these reserves (18%),
with 41m tonnes of fluorite reserves, followed by Mexico
(14%) with 32m tonnes, China (9%) reporting 21m tonnes, and
Mongolia (5%) at 12m tonnes.
Only around 51% of the identified reserves are commercially
mined.
World fluorspar production capacity is about 6.4m tpa,
according to USGS data for 2016, and is dominated by China
(65%) and Mexico (15%), followed by smaller production volumes
from Mongolia (3.5%), and Vietnam and South Africa (3%) (see
Figure 1).
Demand
Aluminium fluoride is one of the largest end markets for
acidspar, supplied from either captive mine production or via
the HF route of merchant production.
Of the world’s 1.5m tpa HF capacity, 51% of
this is consumed by aluminium fluoride and other markets, such
as fluorine-derived chemicals.
Aluminium fluoride is also the principal raw material for
synthetic cryolite (Na3AlF6), and both minerals are crucial
ingredients in the aluminium production process, where they are
used in a molten bath to dissolve alumina and recover
electrolytic aluminium.
Volatility in metal markets over the past few years has
affected demand for aluminium fluoride, although the fact that
it is mostly irreplaceable in the production of aluminium means
that it is a steady, albeit diminished end market. Demand has
not yet reached pre-recession levels seen in 2012.
For metspar, prices are now picking up as steel (rebar and
hot rolled coil) demand in China has been quite strong,
supporting metspar demand. Chinese steel prices, which
are currently quite strong, are normally quite good indicators
of steel demand since China is the biggest producer globally.
(see Figure 2).
According to the IM Pricing
Database, acidspar prices are currently at around
$340-360/tonne for 97% CaF2, wet filtercake material on an FOB
China basis.
The pricing trend for this grade illustrates the market
volatility over the past five years, which has seen prices fall
from highs of $475/tonne in 2012 to lows of $240/tonne in
2016.
The movement in acidspar prices corresponds to output from
leading supplier countries.
Metspar prices have recorded less of a recovery recently
than those for acidspar, but have started to pick up. According
to the IM Pricing Database, prices
for metspar with 80-90% CaF2 content were $260-340/tonne FOB
China at the end of August 2017, having fallen from a peak of
$321-437/tonne in 2012.
China’s influence
Although China does not hold the largest reserves of
fluorspar, it is both the largest producer and consumer of
the mineral.
It is also the largest producer of HF and aluminium fluoride
and is a net exporter of acidspar, but a net importer of
metspar.
In 2016, HF acid production in six provinces in east China
accounted for two thirds of domestic demand, at 1.1m tonnes.
East China acidspar demand, meanwhile, was 2.4m tonnes, but
output was only 1.9m tonnes, leaving a supply gap of around
560,000 tonnes last year.
In the past five years, however, Chinese exports of acidspar
have dropped significantly (see Figure 4), while average export
prices decreased for both CaF2>97% and CaF297% material.
Imports, on the other hand, increased for both acidspar
and metspar.
This is in line with predictions from analysts several years
ago, which stated that China would have to begin importing
material to sate domestic demand.
For fluorspar CaF297%, Chinese export volumes increased 5%
year-on-year (y-o-y) to 173,848 tonnes in 2016, according to
China Customs Data. South Korea and Japan were the largest
consumers of Chinese exports, at 20% and 16.9%, respectively,
followed by India, Taiwan, Indonesia, the Netherlands and
Malaysia. However, the average export price for this grade
dropped from $245.92/tonne in 2015 to $230.33/tonne in
2016.
The northeastern Chinese port of Tianjin accounted for 32.5%
of China’s total exports, though trading companies
use this as a transfer port from Mongolia as well as a direct
shipping route for material produced in China. Zhejiang, the
main fluorspar-producing province in eastern China, accounted
for 21.3% of exports, followed by Jiangxi, Guangdong, Inner
Mongolia, Fujian and Hunan.
For CaF2 97%-grade fluorspar imports into China, volumes
dropped 36.6% y-o-y to 75,062 tonnes in 2016. Mongolia
accounted for 90% and Myanmar for 9% of supply. The average
import price from these countries was $139.30/tonne and
$87.79/tonne respectively, down from 2015, average prices stood
at $141.69/tonne and $106.03/tonne, respectively.
Around 67% of these imports went to Tianjin, 23% to Inner
Mongolia and 9% to Yunnan, which shares a border with Myanmar.
Exports of fluorspar with CaF2>97% content, meanwhile,
saw volumes jump 17.4% y-o-y to 200,866 tonnes. The US, India
and Japan accounted for the largest share of consumption, with
28.5%, 27.7% and 20.6%, respectively, followed by the
Netherlands and South Korea. Only Japan saw a y-o-y drop. The
average export price also dropped from $284.39/tonne in 2015 to
$240.66/tonne in 2016 (See Figure 5).
Import quantities, however, decreased 52.2% y-o-y to 23,621
tonnes in 2016.
Vietnam accounted for 41.3% of this supply while Thailand
accounted for 35%, at price levels of $159.56/tonne and
$178.12/tonne, respectively.
In downstream industries, aluminium fluoride exports from
China dropped 25.4% y-o-y to 115,604 tonnes while the average
export price also dropped to $961.25/tonne compared with a
price range of $1,199.22-$1,077.45/tonne between 2013 and
2015.
HF acid exports from the country in 2016 increased 3.3%
y-o-y to 233,564 tonnes, but average prices averaged
$1,004.24/tonne, down on previous years.
Japan ranked highest in terms of HF acid consumption from
China, accounting for 38%, followed by South Korea (27.6%),
Taiwan (17%), Brazil (3%), the US and Thailand.
Figures from China Customs suggest that HF export volumes
are set to rise again in 2017, with a total of 128,766 tonnes
exported in the first half of this year, compared with 112,996
tonnes in the corresponding period of 2016 and 108,038 tonnes
in H1 2015.
Anti-dumping
Despite the apparently solid growth trend in outbound
shipments of Chinese fluorspar, there are headwinds facing the
Chinese export market. In March 2017, the US Department of
Commerce imposed anti-dumping duties on a number of
refrigerants imported into the US from China.
After launching an investigation in October 2016, the office
determined in April that a series of fluorochemical compounds
commonly known as R-134a from China "is being, or is likely
to be, sold in the US at less than fair value".
Anti-dumping duties of 148.79-167.02% were imposed on
China-origin R-134a imports to the US effective from 1 March
2017.
"This is something that we have been lobbying about for some
time. It has been several years, now it finally looks like it
is going to hold," one US-based fluorochemical industry
participant told IM.
The petitioners for this anti-dumping investigation include
members of the American Hydrofluorocarbon Coalition, which
include Amtrol Inc., Arkema Inc., The Chemours Co., Honeywell
International Inc., Hudson Technologies, Mexichem Fluor Inc.
and Worthington Industries Inc.
Environmental legislation
The largest threat to Chinese fluorspar supply is the
country’s increasingly tight environmental
legislation, which has severely disrupted output in other
Chinese industrial minerals markets.
Fluorspar was named as a strategic mineral in 2017 by the
Chinese government, which means that any decisions regarding
allocation of reserves and resources will be carefully
considered.
Smaller producers are less likely to have mining
applications approved, or be able to afford the required
upgrade of their facilities, which could mean consolidation in
the market.
Several contacts confirmed to IM that environmental
inspections, temporary production shutdowns and new
restrictions on using dynamite, as well as a lack of clarity
surrounding the country’s mining permit renewal
policy have all affected fluorspar production to some
extent.
Most agreed that supply and demand fundamentals ultimately
dictate the direction of the fluorspar industry and its
pricing, but said that environmental inspections are likely to
keep supply tight, meaning that other market factors will have
more of an impact on price.
The recent price rises due to the supply squeeze in China
has already had a positive effect on some
companies’ financials.
China Kings Resources Group, the leading – and the
only listed – fluorspar company in China, announced
revenue and net profit increases in H1 2017 of 20.6% and 32.9%,
respectively.
The company said that for its largest end market, the
fluorine chemical industry (for which it makes HF acid), its
output and capacity both grew by 10% y-o-y.
China Kings’ selling price for acidspar
increased from Chinese renminbi (RMB)1,195/tonne
($182.80/tonne*) excluding VAT in December 2016 to RMB
1,456/tonne ($222.76/tonne) in Q1 2017. In H1 2017, the
price averaged RMB 1,701/tonne ($260.30/tonne).
The company attributed the price increase to recovery in the
downstream HF acid industry as well as growing demand for
fluorspar and the fact that supply was constrained due to
"policy and environmental pressures".
Policy change was outlined as a risk in the
company’s H1 report, with China Kings saying
that, "in recent years, as China has made protective
development [a priority] policy for fluorspar resources, the
industry has been regulated. But as resources are diminishing
and as China is paying more attention to environmental
protection as well as effective resource utilisation
(…), China may announce even stricter policies for
fluorspar mining, exploration and production."
Other fluorspar suppliers
Mexico
Mexichem is the world’s largest vertically
integrated fluorspar company outside China and accounts for the
majority of Mexican production, with an established capacity of
890,000 tpa.
Mexichem has the world’s biggest single
fluorspar mine, Las Cuevas, at San Luis Potosi, Mexico.
It benefits from relatively low mining and
beneficiation costs (around $3.95/tonne, according to a 2008
report by International Mining).
It is completely vertically integrated and sells metspar and
acidspar as well as HF acid and AlF3 and other downstream
products, such as refrigerants.
Mexichem Fluor posted revenues of $583m in 2016, down 4% from
the previous year. EBITDA** was $228m, down 6% y-o-y.
CEO Antonio Carillo said during the company’s
full year 2016 results presentation that he expected to see
"further volume pick up from cement industry customers in
2017".
Nevertheless, Mexico has not been immune to demand stagnation
and testing industry conditions since the global economic
crisis, with the country’s 2016 fluorspar output
hitting its lowest levels in a decade, totalling just 624,754
tonnes.
Mexican junior Fluorita Exportadora de Mexico (FEM)
established a joint venture with local counterpart Minera
Muzquiz in 2015 to mine and beneficiate ore to produce
low-arsenic grades of acidspar from its three projects,
including Los Alisos in the state of Sonora, Navidad in the
state of Durango and Frio in the state of Zacetecas.
Low-arsenic acidspar is currently being produced at Frio and
at Minera Muzquiz’s operations in the northern
Mexican state of Coahuila.
Mongolia
Mongolia is an established fluorspar supplier, producing
230,000 tonnes in 2016, down from 280,000 tonnes in 2015.
Shipments of acidspar were mainly to Russia, China and South
Korea. Metspar was exported to Russia, China and other CIS
countries.
The largest producer in Mongolia is Mongolrostsvetmet LLC,
which manufactures both acidspar and metspar, with a total
production capacity of 130,000 tpa.
Gobi Tushleg Minerals Co. Ltd. is another leading fluorspar
mining company in Mongolia with seven open-pit and underground
mines in Dund-Govi and a total production capacity of 80,000
tpa.
Among the country’s other major suppliers are
MonCzechMetal (11%), Kevin Invest (8%), Bayalag Jonsh (4%),
and Naimgan Ord (4%), while 48% of national output comes from
small suppliers.
New market entrants
Despite being a relatively closed market, new entrants into
the fluorspar industry have still disrupted the supply mix to
some extent.
This is because these entrants have been able to supply
fluorspar to China at a reduced rate, due to having lower
production and transport costs than many established
producers.
While Mexican and South African producers have wound down
production in response to weaker demand and prices, Vietnam
and Thailand have stepped in to cover the shortfall.
Vietnam
The Nui Phao project in Vietnam is owned by Masan Resources
and began supplying the market with an installed production
capacity of 200,000 tpa acidspar in early 2015.
However, due to depressed demand, the company has yet to
reach full capacity and in 2016 produced just under 170,000
tonnes, according to USGS data.
Nui Phao is a polymetallic-fluorite greisen-skarn deposit in
northern Vietnam and Masan’s principal target
product is tungsten concentrate with by-product offerings of
bismuth, copper and fluorspar.
The company has been working on expanding its business by
securing long-term sales contracts with customers through
trader CMC Cometals, which has been offered exclusive
marketing rights for the sale of Vietnamese acidspar.
Afghanistan
Afghan fluorspar producer Amania Mining is expected to start
commercial production of acidspar in early 2018, the company
told IM.
Amania Mining was established in 2010 and has been producing
metspar since 2014 from its Baklud mine in Kandaha. New
acidspar production is behind schedule, but the company is
confident that it will start supplying the material next
year.
Amania produced 60,000 tonnes metspar in 2016 and initial
acidspar (min 97% CaF2) output is expected at 120,000 tpa, but
production could be ramped up according to demand.
"[Amania] may increase production based on our customers and
market demand by adding installation of some more equipment and
machinery in our plant to increase the production capacity,"
the company said.
It wants to offer an alternative to Chinese fluorspar and to
take advantage of the "one-belt-one-road" railway initiative
– a China-led infrastructure project to connect
China and Europe by rail – which is being rolled out
across central Asia within the next two to three years.
South Africa
In South Africa, Nokeng Fluorspar Mine Pty Ltd, a wholly
owned subsidiary of SepFluor, is developing its Plattekop and
Outwash Fan deposits, and is expected to have capacity of
180,000 tpa acidspar and 30,000 tpa metspar by 2019.
It also has a third deposit, Wilton, as yet unexplored.
The average grade of Nokeng’s ore is 27%
CaF2.
In 2016, Sepfluor decided to temporarily shelve construction
of the chemical plant at the site due to low fluorspar prices,
"a general decline in demand for commodities" and "weakening
rand/dollar exchange rate, [which] resulted in negative impact
on pricing for almost all commodities mined in the world". The
company chose instead to focus on acquiring the funding for the
Nokeng mine development.
Canada
New acidspar capacity is expected to come onstream in October
2017 in Newfoundland, Canada from Canada Fluorspar
Inc.’s 200,000 tpa St Lawrence facility. The
company will mine from three pits: Grebes Nest Pit, Center
Pit and Open Cut Pit.
It is expecting to produce 150,000 tonnes of fluorspar for
2018 and has the ability to produce an additional 40,000 tpa
metspar, the company told IM in
September.
The life of mine is at 40 years, with an average grade of
37% CAF2.
Canada Fluorspar, which is owned by US-based private equity
firm Golden Gate Capital, is targeting the US, European and
Middle Eastern markets, it told IM in 2016.
Other potential supply boosts
As well as new entrants to the market there are also
projects which have, for market-related reasons, shut
production, or reduced output in recent years.
With the emergence of new supply from Vietnam and Canada,
there are questions as to whether these projects will start up
again. However, if Chinese supply does diminish on the back of
environmental legislation then there may be room for more
diversified supply.
In April 2016, Kenya’s only fluorspar-producing
company, The Kenya Fluorspar Co., suspended operations at its
processing plant in Kimwarer, western Kenya, in response to
shrinking demand and low prices for fluorspar. The closure took
more than 77,000 tonnes of its 100,000 tonne capacity off the
market.
Although there were rumours that the company may resume
production in the near future, a source close to operations
said that restarting would largely depend on prices in Q4
2017.
*Conversions made September 2017
**Earnings before interest, taxes, depreciation and
amortisation
Global warming
Concern over global warming has prompted several
institutions and campaign groups to petition for bans on the
use of some hydrofluorocarbons.
This year, the US Court of Appeal for the District of
Columbia circuit overturned the US Environmental Protection
Agency (EPA)’s 2015 ruling to ban a series of
fluorochemicals (R404a, R134a, R407C, R410A) from use in new
products from January 2021.
The EPA ruled under the Clean Air Act that a list of high
global warming potential (GWP) fluorochemicals were classed as
unacceptable and would need to be replaced with low GWP
alternatives.
However, the latest decision by the US court means that a
series of fluorochemicals will no longer be banned and could
hit sales of low-GWP alternatives.
Chemours, a US producer of low-GWP products such as
HFO-1234yf for mobile air conditioning and Opteon XP40 for
commercial refrigeration, said it may appeal the decision.
"In the US, CO2 Greenhouse Gas carbon credits remain in
place which offer incentives to US automakers to transition to
a low-GWP refrigerant. Currently, over 50% of the market has
transitioned to HFO-1234yf, and we expect this transition to
continue so that automakers can take advantage of the credits,"
said Chemours.
According to the company, adoption of its low-GWP product
HFO-1234yf in mobile air conditioning units is expected to
double from 25m in 2016 to 50m vehicles by the end of 2017.
For commercial refrigeration, Opteon XP40 is expected to be
adopted in 5,000 supermarkets and commercial refrigeration
systems globally by the end of 2017, according to
Chemours.
Prices
Fluorspar producers outside China are planning to raise
prices for minerals delivered in H2 2017 and 2018 to track
higher Chinese spot prices, suppliers and consumers have
told IM.
Following the widespread shutdown of production in China due
to anti-pollution measures which have been rolled out since
February this year, Chinese fluorspar spot prices have spiked
to a four-year high. To put that in context, prior to
February 2017, fluorspar prices hovered around five-year lows
while supply far outstripped demand.
IM’s price for acidspar (min. 97% CaF2, wet
filtercake) hit a four-year high of $380-400/tonne on a
FOB China basis on 8 June 2017.
In addition, an uptick in demand for refrigerants during the
northern hemisphere’s Spring season has lent
further support to prices.
Fluorspar prices outside China have remained largely
unchanged, as most consumers remained well-covered by long-term
contracts, which concluded at the end of last year.
Few non-Chinese producers have been able to capitalise on
the price uptrend, as they were committed to annual output
volumes on long-term contracts for delivery in 2017.
"We sold on an annual basis [and so] have not been in a
position to negotiate during the year. That’s why
we can’t profit from the increases that we have
been seeing from China," one producer
told IM.
Due to existing commitments, many producers were not able to
supply spot enquiries for delivery in H2. At least two
producers confirmed to IM that they
were sold out for 2017.
However, many producers are planning to raise prices
starting from H2 2017, suppliers and consumers
told IM. The increase is expected to be
in a range of $20-40/tonne on top of existing
long-term contract prices in Europe and the US, suppliers
and one consumer said.
"We cannot overlook the situation of increased prices in
China," the producer said. "We urgently need to increase
prices [for 2018, by] at least $20-30/tonne more. Prices
[are] catching $400/tonne in China. This is quite a big
difference to Rotterdam prices. $20 is a laugh."
Annual 2018 contract talks
Meanwhile, many buyers and producers are beginning to look
towards the annual contract negotiations in September-October,
with buyers expressing concern about the anticipated global
fluorspar price increase.
"People are starting to realise they can take advantage of
this situation in China with higher prices. I will not be
surprised if prices start to accelerate outside China," one
US-based consumer said in August.
"It was the same old news in the past five years; prices
continue to slide down, the market has [now] become a lot more
lively. I’m dreading the negotiations this fall.
It will be more eventful than last year," they added.
Buyers have received indications from producers of a
potential increase of $20-40/tonne on top of 2017 contract
prices, they told IM.
"[They] try to test the market to see what they can get away
with. If accepted, they might push it higher," the US-based
consumer said.
Although fluorspar prices are widely expected to increase in
2018, some buyers are questioning the justification for higher
raw material cost.
"Demand is healthy this year. It’s still like 5%
increase; it didn’t double. It
doesn’t justify [fluorspar] price increase of
[up to] 30%," the consumer said.