13.5
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Heavy Minerals Market Analysis
13.5.1 |
The Titanium Minerals Industry
Approximately 94% of titanium mineral feedstock production (comprising ilmenite, rutile, leucoxene, titania
slag and synthetic rutile) is consumed in the production of titanium dioxide (TiO2) pigment, primarily for use
in the coatings, plastics and paper industries. The chloride process for titanium dioxide pigment production
now accounts for nearly 60% of total production and, with the exception of China and its current emphasis
on the sulphate process, all future net production capacity increments are expected to be of the chloride
process.
Slag is the largest single feedstock for the chloride process while ilmenite is the largest feedstock for the
sulphate process. Major feedstock sources are Australia and South Africa, which together account for 44% of
total feedstock supply. The largest five pigment producers controlled 70% of capacity at the end of 2005.
All products are reliant on penetrating export markets, primarily in the USA, Europe and Asia.
Zircon (zirconium silicate) is a significant co-product of titanium minerals. The US$0.7 billion zircon industry
is smaller, more fragmented and less sophisticated than the titanium minerals industry. Collectively, Australia
and South Africa provide 70% of world production. By far the dominant end use for zircon is as an opacifier
in ceramic glazes.
The other significant co-product is low manganese pig iron, from titania slag production.
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13.5.2 |
Supply/Demand Analysis – TiO2 Pigment
The TiO2 pigment industry experienced more subdued demand during 2005 after the 7.7% growth achieved
in 2004. Production in 2005 increased by 1.1% to an estimated 4.71Mt, resulting in a closely balanced market.
Over the medium term, global consumption growth is forecast to average around 2.8% p.a., allowing for
continued strong demand from China.
Since 1999 there has been explosive growth in both the consumption and production of TiO2 pigment
in China, which became the largest importing country for TiO2 pigment in 2004. Chinese pigment demand
growth for 2005 remained robust at an estimated 10% and there is still an expectation that Chinese TiO2
pigment consumption will grow at over 8% per annum at least until 2008, mirroring GDP growth.
In real terms, pigment prices still remain at levels below that required by the industry to justify major greenfield
investment. Strong price initiatives by the major pigment producers in late 2004 continued in 2005. In the
dominant USA domestic market, prices are now over US$2300/t CIF, but prices in other regions are
considerably lower.
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13.5.3 |
Supply/Demand Analysis – Titanium Feedstocks
Global titanium feedstock production increased by 6.7% in 2005 to an estimated 5.54 million TiO2 units, due
to higher output of most titanium feedstock products. Titanium slag showed by far the largest volume gains,
up 13% over 2004 levels, due to higher production of both chloride slag and upgraded slag. Australia remains
the largest producer of feedstocks, providing an estimated 24% of total supply. South African production rose some 19% in 2005 to an estimated 1.2 million TiO2 units, representing 22% of the global total. Global
consumption of feedstocks remained basically static at 5.45 million TiO2 units.
Global feedstock production is forecast to increase by approximately 0.8 million TiO2 units during the period
to 2008, predominantly as a result of the commissioning and ramp-up of several approved new projects and
capacity expansions. Chloride grade feedstocks, specifically high TiO2 products, are projected to account
for a substantial portion of the overall production increase. Beyond 2008, there is significant potential for
further additional supply from a number of other titanium feedstock projects currently at advanced stages of
investigation.
In the category of projects that have been approved but not yet commissioned, there are seven projects
having capacity of 1.32 million TiO2 units and 244kt of zircon. Seven projects having combined capacity of
just over 1 million TiO2 units and 215ktpa zircon have completed technical feasibility studies, while a further
10 projects with a total stated capacity of 0.8 million TiO2 units and 245ktpa of zircon are under active
investigation.
Over the medium to long term, average annual feedstock consumption growth of 2.8% is anticipated, in line
with the forecast production performance of the global TiO2 pigment industry. The supply/demand outlook
therefore shows a propensity for the overall market to move from current tight supply conditions to a position
of oversupply through to early in the next decade, particularly for high TiO2 chloride feedstocks.
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13.5.4 |
Supply/Demand Analysis – Zircon
Following two consecutive years of market deficits, global zircon inventory levels have fallen to critically low
levels that are well below the normal working stock for the industry. With new zircon supply only set to enter
the market from later in 2006, tight market conditions are forecast over the next two years, with supply
continuing to constrain underlying demand growth. Over the medium to long term, additional zircon supply
from new projects is expected to keep the market closer to balance.
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13.5.5 |
Supply/Demand Analysis – Low Manganese Pig Iron
Global production of low manganese pig iron increased by an estimated 12% in 2005 to 1.6Mt. Strong
demand for pig iron in the production of steel, particularly in China, continued to place pressure on pig iron
supplies during 2005. After the tight market conditions in 2004 when low manganese pig iron prices increased
to US$340/t CIF, the price levels abated to around US$245/t CIF at the end of 2005.
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13.5.6 |
Price Forecasts
Titanium feedstocks: In nominal US dollar terms, the general pricing trend in 2005 was flat, although in real
terms most titanium feedstock prices continued the downward trend evident over the last few years. Prices
for USA imports of chloride slag in 2005 remained flat an average price of US$380/t FOB. The price of rutile
recovered further in 2005, with the average 2005 price for US bulk imports increasing by more than 6%
to approximately US$460/t FOB, due to short-term rutile supply tightness. The 2005 average price of
synthetic rutile imports to the USA increased by 10% to US$410/t FOB.
The overall outlook for titanium feedstock pricing is for relatively stable future prices, in real terms, for the
major product types in the period to 2010. However, there could be some downside pricing pressure for
selected products during the forecast period, given the looming market surplus positions currently forecast.
Zircon: The development of persistent zircon supply deficits since 2002 has had a pronounced effect on
zircon pricing, with prices increasing rapidly throughout the period to early 2005 and further price increases
already negotiated for 2006. However the current trend of constantly increasing prices is not forecast to be
sustainable beyond the end of 2007, as higher prices are attracting additional market supply and could soon
promote reduced zircon offtake in selected end use markets. The forecast long-term real trend price for zircon
is US$465/t FOB to be reached after 2010.
Low manganese pig iron: The trends in the price for low manganese pig iron are closely related to pricing
trends for high quality steel scrap, which can be quite volatile. Prices have increased in recent years due
to strong Chinese demand and while they are expected to remain high in the short term, are forecast to
progressively decline to a longer-term sustainable price of US$180/t FOB.
TiO2 pigment: Pigment prices tend to exhibit cyclical behaviour and show marked regional differences.
Average realised prices are forecast to have peaked in 2005 and then to decline until 2007 before peaking
again in 2010.
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