Andalusite supplies tighten amid high demand and freight delays

By Davide Ghilotti
Published: Wednesday, 15 September 2021

Tightness in the availability of andalusite, caused by logistical issues affecting delivery schedules on key shipping routes, is being exacerbated by strong demand from the downstream refractories sector.

The andalusite market has been supported by strong fundamentals since the beginning of the year due to intermittent issues affecting production operations and a progressive worsening of international transport conditions.

Raw material markets have been recovering quickly after the steep drops in traded volumes and demand during 2020 at the height of the Covid-19 pandemic. Industrial activity, investment and capital deployment now show a rebound after last year’s lows, pushing up prices and demand for feedstock materials.

While the andalusite market is generally more balanced in terms of supply and demand than other refractory minerals such as magnesia or chromite, growing pressure from consumers as demand returns has left supply struggling to keep up.

Earlier this year, Fastmarkets reported production issues in South Africa, with one instance of temporary force majeure at a mine after community unrest and intermittent power outages affecting output at other mines too. The price of andalusite moved higher due to the production slowdown and the effect of rising freight costs on delivered prices.

Fastmarkets assessed the price of andalusite, 57% Al2O3 min, cif Europe at €350-440 ($413-519) per tonne on August 27, unchanged from May but up 5% from €325-425 per tonne in February. The February price was already €5 up on both ends from the previous quarterly assessment in November 2020.

"Price is secondary to being able to secure the volumes right now," one consumer said. "There is tightness everywhere and consignments are late."

A producer source told Fastmarkets they have received several requests for additional volumes from their customers, who want to purchase more than what they had contracted for this year. The source said he was "unable to meet any of those requests" and he was sold out until 2022.

This sense of tightness is being felt further down the chain. An agent distributing andalusite in southern Europe described a similar situation. "We are not receiving any more volumes until next year," the source said in late August. "There is demand from our customers: they all want to buy more, but we can’t supply."

Sources on both sides of the market stated that strained logistics and increasing shipping costs continue to be a leading source of concern.

Sea freight costs have been increasing since the fourth quarter of 2020. Initially, this only affected container freight out of China towards other destinations, but in the following months the issues began to affect other seaborne routes such as South Africa to Asia, South Africa to Europe, and Latin America to Europe. Costs have also risen for bulk freight and the ongoing capacity shortage is leading to long delays and congestion.

"The logistics mess is compounding the issue of tighter supply at a time of high demand," one buyer said.

Global andalusite output in an average year is estimated to be around 300,000 tonnes, excluding China, which accounts for another 10,000-15,000 tonnes, although those volumes are all consumed internally. China is a net importer of the raw material.

"It’s early to say what global output will be this year, but I can tell you this – not a single tonne is going spare," a seller said.

Tightness in alternative raw materials
As Fastmarkets reported earlier this year, recent developments affecting other raw material markets are compounding the sense of tightness that andalusite market participants are feeling.

Following an electrical incident, Imerys’ mullite plant in Georgia, the United States, was offline for almost a month during April and May. The company restarted its operations in mid-May and has been working since then to recover the production shortfall. Mullite and andalusite can be used as alternative feedstock in some refractory formulations.

Bauxite can be used as a substitute in some applications, too, although mullite tends to be a preferred alternative.

"Mullite 60% is the first alternative to andalusite. The two are the closest relatives. So, the issues you have in alternative markets such as mullite are affecting andalusite," a trader said.

Likewise, supply of Chinese refractory grade bauxite has been limited since the beginning of the year, owing to ongoing mining restrictions and widespread logistics bottlenecks, at a time when demand from buyers is growing fast.

The price assessment for bauxite, refractory-grade, 85%/2.0/3.15-3.2 (0-6mm), fob Xingang stood at $420-430 per tonne in August, up from $385-395 per tonne in September 2020.

Supply concerns abound over supply of bauxite from China later this year and early next year. The winter months are likely to bring another round of restrictions to heavy industry in China, as will the Winter Olympics, due to take place in Beijing in February.

Logistics are also likely to continue to affect deliveries and stock levels of bauxite in consuming markets. The perception of low availability in related raw materials is adding to pressure in the andalusite market, sources said, and is bound to shape supply flows in the coming months.