Demand for mineral sands booms

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Published: Tuesday, 12 October 2021

Demand for mineral sands is booming at the same time that supply is constrained. William Clarke outlines the outlook for the short- and long-term supply-demand balance for the titanium dioxide feedstock sector.

Titanium dioxide pigment, sulfite grade, fob China  

Mineral sands prices are on the rise, with suppliers struggling to keep up with demand from the titanium dioxide sector. And although some short-term supply concerns have eased, the market will still need new sources of supply if it is to avoid slipping into a long-term structural deficit.

Heavy mineral sands are seams of mineral-rich sands, often found on beaches or riverbeds where they are sorted by hydrological action. These deposits can contain a wide mix of materials, but they are particularly important as sources of ilmenite and rutile, the key commercial feedstocks for the white pigment titanium dioxide.

Demand for these feedstocks is rising due to booming demand from the titanium dioxide industry. And demand for titanium dioxide is very closely linked to global gross domestic product (GDP) growth, with the key drivers being manufacturing, particularly consumer goods and automobiles, construction and renovation. For this reason, demand has been rising with the global economic recovery through 2021, with global economic activity bouncing back from the effects of the Covid-19 pandemic.

The pace of this global recovery, particularly in China, which is both the world’s largest producer and consumer of titanium dioxide pigment, has helped prices achieve upward momentum for the first time in years. Fastmarkets assessed the price of titanium dioxide pigment, sulfite grade, fob China at $3,000-3,200 per tonne on Thursday September 30 compared with $2,200-2,400 per tonne a year earlier.

Booming demand
In half-year results released on August 18, mineral sands miner Kenmare reported strong demand for ilmenite. "Accommodating monetary and fiscal policy globally has boosted demand for TiO2 pigment, which has led pigment producers throughout the globe to run their plants at high operating rates and has resulted in a firm demand environment for ilmenite," it said.

The company noted an increase in ilmenite supply from a number of areas, including China and Vietnam. "Despite this greater supply, we believe the market remains undersupplied and this is being exacerbated by global supply constraints," Kenmare said. "We have a strong order book for the remainder of the year and the market is absorbing increased production."

Base Resources, another major miner, said in its second-quarter results, released on July 29, that Western pigment producers continued to ramp up production rates toward full capacity through the quarter. "Chinese pigment producers maintained high output rates as their domestic market improves and high volumes of pigment exports are sustained," it said.

This increase in Chinese production is supporting demand for ilmenite, in particular. "Demand for ilmenite as a feedstock for Chinese pigment producers again exceeded supply, resulting in further solid price gains for ilmenite in the quarter," Base Resources said, forecasting that "ongoing strong demand will maintain a tight ilmenite market through the June quarter."

Rutile prices are also expected to benefit. "The ramp-up of western pigment production through the past two quarters has absorbed the slight surplus in high-grade feedstock inventory that was created in the second half of 2020 and has resulted in an increasingly tight market for rutile," Base Resources said.

Short-term concerns ease
There is long-term uncertainty about the availability of titanium dioxide feedstock as the market enters a structural deficit, which will need new mines to meet demand.

Mineral sands miners’ output tends to decline over the life of the mine. This is because of grade depletion. Early in the life of the mine the highest-grade parts of the deposits are targeted, which means a higher output of valuable minerals per tonne of ore mined. As the mine grows older, the quality of the ore falls, slowing the production of minerals.

In the absence of new mines opening, the only way to keep up with demand is for miners to expand the size of their operations, to mine and process more ore, across a larger area.

Short-term concerns about feedstock supply have eased somewhat after recent news about future output at two important sources.
Rio Tinto announced on August 24 that it had begun the process of restarting operations at Richards Bay Minerals (RBM) in South Africa, which had been halted due to an ongoing security issue at the site. Rio Tinto on June 30 declared force majeure on customer contracts for titanium slag production from RBM, having halted mineral sands mining earlier this year due to an outbreak of violence that threatened the safety of workers.

On July 21, Rio Tinto announced that the RBM operations will shut one of its four titanium slag furnaces, slowing the depletion of stockpiled feedstock after mining operations at the site were halted. With mineral sands mining stopped, the furnaces at RBM had been relying on stockpiled ilmenite.

This was the latest in a series of disruptions at the site, with operations stopped before in recent years due to a long-term dispute within the local community, concerning the succession to a chieftainship. A planned $463-million upgrade to RBM has been on hold since 2019.

RBM is a major seller of rutile and zircon, and one of the largest producers of titanium slag, which is upgraded from ilmenite produced at the mine. Rio Tinto, which also produces titanium slag at a facility in the Canadian province of Quebec, is a significant titanium slag producer supplying titanium dioxide pigment producers.

Titanium slag is used as a high-grade titanium dioxide feedstock, with similar properties to rutile.

Rio Tinto's titanium dioxide slag production was down by 7% to 1.12 million tonnes in 2020. The producer attributed the decline to lower market demand and operational problems at its RBM facility.

The restart of operations was due to "a stabilization of the security situation around the mine, supported by the national and provincial government, as well as substantive engagement with host communities and their traditional authorities," RBM said.

"The overall impact of the suspension of operations, including the shutdown of furnace No4 as announced on [July 21, 2021], is still to be assessed. At this time, the force majeure declared on customer contracts remains in place," RBM said on August 24.

Further good news for feedstock buyers came from reports that Iluka’s Sierra Rutile subsidiary will delay a planned shutdown. Iluka’s Sierra Rutile mine in Sierra Leone was previously slated to be mothballed in the fourth quarter of 2021 because of business and financial challenges, but this shutdown has now been delayed until at least January 2022.

Future supply
With long-term supply tightness increasing, particularly in ilmenite, the question now is where the market will source new supply.
One of the most advanced projects at this point is Sheffield Resources’ Thunderbird project in Western Australia. The resource contains an estimated 748 million tonnes of ore, of which 11.2% is saleable heavy mineral content, including particularly ilmenite and zircon.

Sheffield Resources is planning a final investment decision by the end of 2021 before beginning construction on the project in the first half of 2022. The company has already signed an offtake agreement for all its planned ilmenite production, with titanium dioxide producer Yansteel.

This tie-up with Yansteel, which was formalized into a joint venture in the first half of 2021, marked a significant step forward for the project.

Strandline Resources is also potentially bringing more supply to the table as it ramps up construction at its Coburn mineral sands project in Australia.

The company is targeting a start to its ore processing plant in late 2022, and the project has a planned final capacity of 110,000 tonnes of ilmenite, 24,000 tonnes of rutile and 88,000 tonnes of zircon per year.

Strandline has already signed its final offtake contract for the project, with binding contracts estimated to average around $140 million per year. "Our forecast revenue is fully-underwritten by binding sales contracts, and we are perfectly placed to capitalize on increasing demand and falling supply of zircon and titanium minerals following years of under-investment in the sector," Strandline Resources managing director Luke Graham said.

The long-term nature of mining projects, and the time needed for their construction and production ramp-up, means that no immediate easing of supply constraints is likely to come from projects in the pipeline. Markets are instead likely to remain dependent on supplies from China and Vietnam for now, both of which are vulnerable to short-term disruptions due to shifts in government policy. The result is that a sector that has seen low prices and underinvestment for years is suddenly attracting a great deal of interest.