Andalusite seeks new balance amid shifts in supply, demand

By Davide Ghilotti
Published: Wednesday, 09 September 2020

The andalusite market has been rocked by a drop in supplies following closures related to the Covid-19 pandemic in producing countries, and a subsequent adjustment in demand in some consuming markets. But sources believe that a new balance is in sight.

The first half of 2020 was marred by a series of mining closures and logistical issues in the major production regions of andalusite, the refractory raw material.

Andalusite miners in South Africa and Peru were hit by nationwide lockdowns imposed by their respective governments to try to contain the spread of the Covid-19 virus.

This brought andalusite production to a standstill between March and April. Market sources estimated that global output could be down by as much as 20,000 tonnes this year, although some estimated it to be closer to 25,000-30,000 tonnes lower.

Andalusite Resources and Imerys, the two producers with operations in South Africa, were affected by a closure lasting almost five weeks. Sources active in the market have estimated that a combined total of around 15,000 tonnes of supply may have been lost between the two.

Peru, another main supplier of the material to the international market, also halted operations during a closure of more than one month. Sources in the market estimated a loss of output of about 4,000-5,000 tonnes in Peru during the closure period.

Production was now understood to be back on track in all origins, with miners ramping up and trying to recover some of the lost volumes.

"Production is about 85% of normal now, but [international] demand appears to be strong," one producer said.

"We are gradually recovering from the lost time and we are meeting our existing orders," another producer added.

Some market prices showed a marginal upward adjustment as a result of the pressure on supply triggered by lower output and logistics disruptions. Fastmarkets assessed the price for andalusite, 57% Al2O3 min, cif Europe, at €320-440 ($379-521) per tonne on May 28, up from €310-430 per tonne on February 27.

"Logistical issues, delays all over the place and, generally, less material are all affecting delivered prices into main markets," a consumer said at the time.

Meanwhile, Fastmarkets’ quarterly price assessment for andalusite, 57% Al2O3 min, fob South Africa, was stable at €260-340 per tonne on May 28.

Shifting demand

But supply was only one part of a two-sided problem affecting the andalusite sector.

Demand, particularly in key consuming markets such as Europe, took a hit with refractories producers seeking to review their purchasing plans in light of poorly performing steel, automotive and industrial markets.

Market sources, however, believed that supply may have dropped further than demand, and tightness could still characterize trading conditions in the coming months. One supplier estimated a drop in demand of around 5,000-8,000 tonnes, compared with "at least three times more in terms of lost supply."

These conditions were reflected in Fastmarkets’ higher price assessments on a delivered Europe basis.

The fundamentals of the sector concurred to support a degree of balance between supply and demand, even amid the current conditions. Global andalusite output was estimated at about 300,000 tpy, according to industry sources in contact with Fastmarkets.

This volume excluded China, where a couple of local operations were reported to add some 10,000-15,000 tpy, all consumed domestically.

In contrast with other refractory raw materials, such as magnesia or graphite, andalusite supply – being controlled by a small number of suppliers and origins – tends to be broadly in line with general demand. Contracting is, for the most part, settled on long-term agreements which are mainly yearly or half-yearly, compared with a comparatively small spot market.

This means that free stock volumes tend to be lower than in other refractory markets that rely more on spot trading. Price fluctuation, as a result, is limited in this market compared with those for other raw materials.

At the time of writing, demand was seen to be recovering to an extent.

"We saw demand falling slightly in some markets but increasing in others. Considering the lower output, we don’t expect much of an imbalance, after all," one seller said.

"There is now an equilibrium between what we are producing and the orders we have," another supplier said. "We don’t have any volumes unsold for the rest of the year. Prices are steady and, in certain markets, we could even achieve a marginal increase."

This article was first published in the September 2020 issue of Metal Market Magazine, which carries in-depth feature articles, analyses and reviews of metal and steel markets.