Fluorspar market on edge as new participants step in

By Michael Greenfield
Published: Thursday, 06 September 2018

Moves by Canada Fluorspar and Sepfluor to enter the global fluorspar market have raised questions about how this will affect the worldwide supply and demand dynamic, and how fluorspar prices may be affected.

New production of fluorspar from Canada Fluorspar, which has been beset by delays, might come to the market around the same time as South Africa’s Sepfluor makes its first shipments. This has led some market participants to wonder what effect this new supply will have on the currently high prices.

Fluorspar supply is tight at the moment because of reduced output from China, which has propelled acidspar prices to multi-year highs so far in 2018.

Many participants are waiting to see if the new supplies from Canada Fluorspar and Sepfluor, each of which will 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 more than $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 about when, or if, the idled operations in China will come back on stream, the expected production from Canada Fluorspar and Sepfluor could create the next pinch point for the market’s supply-demand balance.

Market participants are waiting to see if new supplies will push prices down.

New capacity

The first shipments from Canada Fluorspar, which is based in Newfoundland, were due in the final months of 2017 but the company has still not made any sizeable deliveries of material, Industrial Minerals understands.

Canada Fluorspar did not make any comment on this at the time of publication.

Meanwhile, Sepfluor is the next large-volume project that has a firm date for when it will come on stream. The first shipments will be made 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 next year, allowing consumers to gauge the consistency and quality of the material and to decide whether it can be accepted in their own production systems, according to Wagner. He 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" and believed that prices will not stay at such highs after Sepfluor enters the market. A "new equilibrium" of $350 per tonne will be achieved, he predicted.

But Sepfluor is not the only source in the African region from which new sources of supply are expected. SA Fluorite and Kazakhstan’s Eurasian Resources Group are leading investors in the 180,000-tpy Doornhoek project in South Africa’s Guateng Province, although this is still three-five years away from coming online.

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

"We hope to break even at around $200 per tonne, so the price is less significant - the quality is the more 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, the latter of 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 Gujarat Fluorochemicals (GFL) has recently brought a 40,000-tpy mine in Morocco which is already producing.

"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 added.

And the Kenyan Ministry of Mining has been reported to have found a new investor recently for the 120,000-tpy mine in the Kerio Valley, formerly operated by Kenya Fluorspar. If this is correct, it may plan to return the mine to production, although Industrial Minerals could not verify this with the ministry at the time of publication.


China, Canada variables

The fluorspar market should remain tight despite the additional supply that the two soon-to-commission South African producers will provide, they believe.

"Certainly, Sepfluor will relieve some pressure [in the market] but China is the biggest issue. The time when Canada Fluorspar comes online is also an important factor," Wagner said.

The market in China will remain tight until summer 2019 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 country’s government, although Industrial Minerals has received unconfirmed reports that the sector is operating at 45-50% of capacity.

The use of environmental controls intensified throughout 2017, leading to a jump in prices in 2018 contract negotiations. The price of 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 expected effects of China’s environmental controls, claiming that Chinese sellers are merely pushing for higher prices. Still, it is unlikely that prices will remain at the current 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 said.

Saad agreed, saying that China will "probably" become a net importer at some stage. 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 change its mind.

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

A European consumer has forecast that the market will "immediately go long" once the new capacity comes to the market, estimating the amount of oversupply to be just a "few thousand tonnes" at present.

One producer believes that prices should move down by "$50-100 per tonne, depending on location."

And 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.

Primary aluminium production globally is forecast to grow by 4.1% in 2018.

Long-term view

The longer-term market fundamentals support the presence of additional supply, according to Sepfluor’s Wagner, who forecast that the market will be undersupplied by 600,000-800,000 tpy by 2025.

"There will be room for two, three or four [new] mines in the coming years," he 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 volume at 6.5 million tpy, this would equate to 7.18 million tpy by 2023.

Canada Fluorspar, Sepfluor and the Kenyan mine can account for 520,000 tpy at full capacity, thus leaving room for a fourth new 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 tpy, or 33% of the world’s supply. Any long-term decreases in volume would weigh heavily on global 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-demand balance, and therefore of prices.

Rising demand for aluminium fluoride

Estimates of primary aluminium production show that global output will grow by 4.1% in 2018. This in turn will require greater volumes of fluorspar-derived product, such as aluminium fluoride (AlF3).

Key growth markets include those in North America, which will grow by 7%, producing an additional 70,000 tonnes of primary aluminium, and Asia (excluding China), which will grow by 7.6% to add another 102,000 tonnes, according to forecasts from Metal Bulletin Research.

China alone will add 280,000 tonnes of the metal, equating to 3% growth. All growth combined will see the global total rise to 16.7 million tonnes from 16.04 million tonnes in 2018.

United States President Donald Trump put trade tariffs on US aluminium imports in order to boost domestic production, under the country’s Section 232 trade laws. The industry responded to this swiftly and it has been reflected in output forecasts.

In the US-production space, Century Aluminium and Magnitude 7 Metals have both restarted pot lines.

Century restarted three potlines, which will revive 150,000 tonnes per year of previously idled production at its plant in Hawesville, Kentucky, while Magnitude will restart two of three idled potlines at its 263,000-tpy plant in New Madrid County, Missouri.

Magnitude is considering "the restart of a third and final pot line of primary production capacity, if and when market conditions allow," chief executive officer Robert Prusak has told Metal Bulletin.

These restarts were made public within two days of each other, on March 12 and 13 – five days after the Section 232 tariffs were announced.

In terms of draw on raw materials, the new smelters require 13-14kg of AlF3 per tonne of primary aluminium, whereas the older smelters need 25-28kg of AlF3 per tonne of output.

And every tonne of AlF3 produced requires 1.9-2.0 tonnes of fluorspar.

The additional US aluminium production volumes in 2018 could require another 11,000 tonnes of fluorspar, with global aluminium volumes requiring 110,000 tonnes of fluorspar.