FOCUS: Is there room for 400,000 tpy of new capacity in the fluorspar market?

By Michael Greenfield, Michael Greenfield
Published: Friday, 27 July 2018

The delayed and impending entrances to the market of Canada Fluorspar and Sepfluor respectively have raised questions about how supply and demand and subsequently fluorspar prices may be affected.

Fluorspar production from Canada Fluorspar, which has beset by delays, might come to the market around that same time that South Africa's Sepfluor makes its first shipments, leading some in the market to debate the impact this new supply will have on currently high prices.

Fluorspar supply is tight due to reduced output from China, propelling acidspar prices to multi-year highs this year.

Many participants are waiting to see if the new supply from Canada Fluorspar and Sepfluor - each of which is adding 200,000 tonnes per year of capacity to the market - will push prices down.

Several buyers and suppliers believe that current prices, particularly out of China, at above $500 per tonne for some grades are unsustainable.

Industrial Minerals' price assessment for acidspar, 97% CaF2, wet filtercake, fob, China was $450-530 per tonne on July 12.

With demand currently strong and little clarity as to when, or if, shuttered Chinese operations will come back on stream, the forthcoming production from Canada Fluorspar and Sepfluor could be the next pinch point for the market’s supply/demand balance.

acidspar china june  

New capacity

The first shipments from Canada Fluorspar, based in Newfoundland in Canada, were due in the final months of 2017 but the company has yet to make any major deliveries of the material, Industrial Minerals understands.

Canada Fluorspar did not comment when contacted by Industrial Minerals.

Meanwhile, Sepfluor is the next large-volume project that has a firm date for coming on stream - first shipments will come by the end of January 2019, chief executive officer Robert Wagner recently reiterated to Industrial Minerals.

Sepfluor will serve a wide range of users via shipments of 5,000-8,000 tonnes until June, allowing consumers to gauge the consistency and quality of the material and whether it can be accepted in respective production systems, according to Wagner, who does not believe that this extra supply will affect prices.

"I don’t think [Sepfluor coming online] is going to change pricing much, - a lot of product will disappear in trial shipments and will not relieve the shortfall of supply in the market," he told Industrial Minerals.

Wagner described a price of $500 per tonne for acidspar as "unsustainable", believing that prices will not hold at those highs after Sepfluor's entrance to the market. A "new equilibrium" of $350 per tonne will be achieved, he predicted.

Sepfluor is not the only forthcoming supply source in the region - SA Fluorite and Kazakhstan's Eurasian Resources Group are leading investors in the 180,000 tpy Doornhoek project in South Africa’s Guateng Province, which is still three-five years from coming online.

The team working on the project has played down the importance of where prices will be at that point.

"We hope to break even at around $200 per tonne so the price is less significant - the quality is the most important aspect," consulting geologist Allan Saad told Industrial Minerals.

The Doornhoek fluorspar will be well placed to compete with its local competitors, Sepfluor and the well-established Vergenoeg mine, which is owned by Spanish mining group Minersa, because of the expected lack of impurities, Saad believes.

"We will supply as much as the market can take," Saad said, emphasizing the company's plan to focus on quality and stability of supply.

The company will initially bring 120,000-150,000 tpy to the market and then ramp up to full capacity, he added.

Elsewhere, India-based Gujurat Fluorochemicals (GFL) has recently brought a 40,000 tpy mine online in Morocco.

"It all depends on the market and where the price is but we would be looking to sell in Europe," GFL executive president BC Jain told Industrial Minerals. The all-acidspar output could also be consumed internally by GFL, he said.

The Kenyan Ministry of Mining has reportedly found a new investor in recent weeks for the 120,000 tpy mine in Kerio Valley, formally operated by Kenya Fluorspar Co. If so, it may plan to return the mine to production although Industrial Minerals could not verify this with the ministry by the time of publication.

China and Canada variables
The fluorspar market should stay tight despite the additional supply the two soon-to-commission South African producers will provide, they believe.

"Certainly, Sepfluor will relieve some pressure but China is the biggest issue and when Canada Fluorspar comes online is also an important question," Wagner said.

The market will remain tight until next summer in China due to the environmental controls in place there, Wagner believes.

It is unclear exactly how much Chinese fluorspar production has been affected by anti-pollution controls enforced by the government although Industrial Minerals has received unconfirmed reports that the sector is operating at 45-50% of capacity.

The environmental controls intensified throughout 2017, leading to a jump in 2018 contract negotiations. Prices have also risen - Chinese acidspar, fob China climbed to $450-550 per tonne in April this year from $400-420 per tonne in January.

Some market participants have disputed the extent of the impact of China's environmental controls, claiming that Chinese sellers are merely pushing for higher prices. Still, it is unlikely that prices will remain at elevated levels after new non-China origin volumes come to the market.

"The situation is extreme and the market has found a new normal where China will be in a different position. We believe that by early 2019 China will reach a supply-and-demand equilibrium and then move to become a net importer," Wagner added.

China will "probably" become a net importer at some stage, Saad also estimates. With China’s supply to the market falling, the timing depends on whether Chinese producers can develop new resources, he said, cautioning that the controls could "change overnight" should the Chinese government choose to do so.

While acknowledging the current market tightness, market participants do not believe the market requires an additional 400,000-500,000 tpy of capacity at present.

A European consumer forecast the market will "immediately go long" once the new capacity comes to the market, pegging oversupply at just a "few thousand tonnes" at present.

A HF producer that believes the prices should move down by "$50-100 per tonne, dependent on location."

Still, since Canada Fluorspar is close to large-volume consumers in North America, a single consumer could comfortably absorb most of its output, one seller suggested.

Most of the additional capacity will go to the hydrofluoric acid market, one fluorspar producer claimed - this sector comprises high-volume consumers that may then look to use extra supply to "bring the market into balance" by driving prices down.

Long-term view
The longer-term market fundamentals support more supply, according to Sepfluor's Wagner who forecast the market to be undersupplied by 600,000-800,000 tonnes by 2025.

"There will be room for two, three or four mines in the coming years," Wagner said.

This is broadly in line with Saad’s prediction that the market will grow by 2% each year for the next five years. With the current market size at 6.5 million tonnes, this would equate to 7.18 million tonnes by 2023.

Canada Fluorspar, Sepfluor and the Kenyan mine can account for 520,000 tpy at full capacity, leaving room for a fourth mine if those growth predictions are correct.

All this remains highly dependent on whether or not Chinese output recovers. Production in China accounts for around 2.15 million tonnes or 33% of the world’s supply; any long-term decreases in volume would weigh heavy on world supply, putting upward pressure on prices.

Unless there is a significant shift in demand, this makes the long-term effects of the Chinese environmental controls the major driver of the market’s supply-and-balance and therefore of prices.

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  • Antony Wong | 06 Aug 2018, 6:34 PM

    China's environmental pollution control policy will continue to affect fluorite production capacity for at least the next five years.