Industrial Minerals: The Year in Review for Titanium Feedstocks, Bauxite & Alumina, and Ground & Precipitated Calcium Carbonate

LONDON, December 15, 2016 /PRNewswire/ --

Overall, it was a mixed year for commodities in 2016. Overarching trends included debt reduction by the major public mining companies, adjustment to China's slowing economy, and market reactions to the growing public sentiment against 'business as usual' - the European referendum vote and the presidential election in the USA.

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Prices for a number of commodities were at several-year lows as the new year began. But by mid-2016 commentators and companies alike were calling the bottom of the market, and commodity prices appeared to be supporting this: increases were seen in aluminium, crude steel, iron ore and across a range of minor metals and industrial minerals.

Moving into 2017, stability appears to be the key aim of the major miners. For industrial minerals in particular, the outlook for 2017 is positive - with two major mergers announced in the titanium minerals sector in 2016, this could well be the theme of the coming year.

Titanium feedstocks 

The year 2016 ended better than it started for the titanium minerals industry, as during the year demand and prices began to creep upwards. The major end-use for titanium minerals feedstocks, the titanium dioxide (TiO₂) pigment industry, started to pick up after four years of decline. Pigment capacity utilisation is rising and market confidence is creeping through the market. Increased consumption in the paint and coatings sector, and a reduction in production levels mean that TiO₂ pigment producers seem to have turned the corner. However, whether the price increases are sustained remains to be seen. The sector has a history of short-lived price rises, followed by longer periods of decline.

Having said that, feedstock Inventories have been reduced, particularly of ilmenite, which has brought some relief to the market and prompted restarts and capacity increases. This is due in part to the slump in associated iron ore mining in China; ilmenite is mined as a co-product for use in sulphate-route TiO₂ pigment production. The reduction in Chinese mining has led to a slight rise in ilmenite imports, and strengthening of prices.

During the year, industry leader Iluka pressed ahead with its bid for natural rutile producer, Sierra Rutile. Sierra Rutile owns the largest primary rutile deposits in the world, located near the Imperri Hills in Sierra Leone, and produced 126,000t of rutile in 2015 - second only to Iluka in Australia, with 129,000t of production. Iluka is already a leading producer of both natural and synthetic rutile in Australia, while Sierra Rutile is undertaking projects at Gangama, Gbeni and Sembehun that could see it increase its total TiO₂ feedstock output to 330,000tpy by 2023 with most of this comprising rutile. The deal, concluded in December, makes Iluka the largest natural rutile producer worldwide by a substantial margin.

Iluka also suspended mining at its Jacinth-Ambrosia mine in South Australia in April 2016, which is expected to remain idled for 18-24 months, but that is dependent on market conditions. However, the company also gave the green light to detailed financial and operational planning for the rutile-rich Balranald and Nepean Mineral Sands projects in New South Wales, Australia. This was after trialling an alternative mining technique which is a lower capital-intensive development option.

In response to the improving markets, Southern Ionics announced that it would ramp up mining activities and increase throughput at its plant in Georgia, USA. Elsewhere towards the end of the year, Sibelco reversed a decision to pause production on Stradbroke Island in Queensland, Australia after demand picked up for both ilmenite and rutile. All mining activities are scheduled to be phased out in the North Stradbroke Island region by 2019, as part of the Queensland government's drive to return to the original intent of the North Stradbroke Island Protection and Sustainability Act 2011.

Consolidation and mergers are characterising the TiO₂ pigment industry and 2016 was no exception with the merger of Chinese titanium dioxide pigment giants Henan Billions and Sichuan Lomon. The merger was first announced in May 2015, but has yet to be finally completed in 2016. In late September, Henan Billions confirmed that it had raised US$1.3Bn to fund the acquisition. In the wake of this, it is highly likely that there will be further mergers in China as the industry consolidates further.

Non-metallurgical bauxite & alumina 

It was a mixed year for the non-metallurgical bauxite and alumina sector, with specialist producers generally outperforming their diversified counterparts.

The beginning of 2016 saw Alcoa curtail the remaining 810,000tpy capacity at the Point Comfort smelter alumina refinery in Texas, USA, which had traditionally been an important supplier of alumina and aluminium hydrate to the US non-metallurgical sector.

The US market was further affected when Sherwin Alumina filed for Chapter 11 bankruptcy and later revealed it would wind down its plant at Gregory in Texas. As a result, in September Germany-headquartered Nabaltec temporarily suspended operations at its Nashtec joint venture, whose speciality ATH plant in Corpus Christi was reliant on Sherwin for aluminium hydroxide feedstock. Nashtec was formed in 2005 originally as a JV between Nabaltec and Sherwin. Nabaltec's existing plant at Schwandorf in Germany was expanded to meet commitments while alternative feedstock supply for Corpus Christi is found.

The US market was not without its opportunities, however. In February, Noranda Aluminum voluntarily entered Chapter 11 restructuring and as part of this said it would fast-track a doubling of the company's non-metallurgical alumina capacity at the Gramercy refinery. The original plan was for alumina capacity to increase from an estimated 200,000tpy to approximately 400,000tpy by March 2016, but this was revised to a 40% increase scheduled for 2017.

The last 12 months also saw non-metallurgical producers cement their leading positions. In February, integrated speciality alumina producer Almatis said it would increase non-metallurgical production from its Burnside alumina refinery in Louisiana to plug the gap in the North American market.

In October, the European Commission cleared Imerys' purchase of Alteo's two white fused and brown fused alumina plants in France, increasing the group's dominance in the fused alumina sector. The sale also included the tabular alumina plant at Teutschenthal in Germany (35,000tpy), providing Imerys with its first internal tabular alumina facility and one of the few operations not controlled by Almatis or Chinese interests.

The refractories market is the largest consumer of non-metallurgical bauxite and alumina, and 2016 continued to be a tough environment for the main refractories end-user sector - crude steel. January to October crude steel output was down 0.1% y-on-y but the picture differed regionally, with Europe (-4.2%) and North America (-1.3%) contracting while Asia grew (+1.0%). Chinese production fell 1.1% in H1 2016 but the situation reversed in the latter months of the year, contributing to an overall 0.7% increase and worsening crude steel oversupply.

Excess steel output has negatively impacted refractories demand and pricing, with Chinese refractories production falling nearly 12% y-on-y in Q1. This has in turn affected refractory raw materials consumption. Conditions are likely to improve when steel supply and demand is more closely balanced and profitability in the sector improves, but the timescale for this is unclear. The latest forecasts from China's Ministry of Industry and Information Technology expect domestic output to fall to 750-800Mtpy by 2020, compared to 803Mt in 2015.

Metallurgical bauxite & alumina 

Early 2016 saw some of the lowest prices experienced for alumina and primary aluminium in recent years, resulting in a shake-up of the industry order in terms of companies and exports throughout the rest of the year.

Low prices and excess capacity led to a number of producers making cutbacks. Alcoa idled the remaining 810,000tpy alumina capacity at its Point Comfort refinery in early 2016. This brought the amount of capacity Alcoa had curtailed or closed to a total of 812,000tpy aluminium and 3.3Mtpy alumina.  

Worldwide reductions started to take effect as the price of smelter-grade alumina in November 2016 recovered to US$316/t (Australian 98.5% min. Al₂O₃, CIF China) from a nadir of US$211/t observed at the beginning of the year.

Weaker demand for smelter-grade alumina and primary aluminium was reflected by Chinese imports for bauxite in 2016, which at an estimated 50Mt represented a 10% decrease y-on-y. Imports of alumina were also down an estimated 38% y-on-y. The Chinese demand for aluminium remained the primary driver behind the global bauxite and alumina market in 2016, and the repercussions of lower demand were felt worldwide.

A bauxite mining moratorium imposed by the Malaysian government in January 2016 remained in place throughout the year. The ban was introduced to clamp down on unregulated mining and followed increased environmental fears in the country's leading bauxite-producing state of Pahang. Exports were only permitted to clear stockpiles from ports.

Malaysia was the largest supplier of bauxite to Chinese alumina refineries in 2015 and its absence from the market meant that the Chinese turned elsewhere to fill the supply gap. Australia stepped up and was the largest supplier of bauxite to China in 2016 delivering an estimated 22.5Mt.

Guinea also profited from the Malaysian ban, exporting an estimated 10Mt to China in 2016. The country possesses the world's most significant bauxite reserves, but its potential has long been shackled by poor infrastructure. However, the SMB-WAP joint venture formed by Singapore-based shipping company Winning International Group and several other investors ramped up shipments of bauxite from Guinea to China throughout the year. Emirates Global Aluminium (EGA) also announced the completion of its new port facility at Kamsar, Guinea, with bauxite shipments scheduled to commence in 2018.  

On 1 November, Alcoa officially separated into two independent, publically-traded companies. One, which continues to operate under the Alcoa name, takes charge of the upstream operations formed of Alcoa's Bauxite, Alumina, Aluminium Casting and Energy businesses. The other, Arconic, includes the company's Global Rolled Products, Engineered Products and Solutions, and Construction Solutions businesses.

Also in November, Russian aluminium giant RUSAL completed the US$299M sale of its Alumina Partners of Jamaica (ALPART) Essex Valley refinery to Chinese Jiquan Iron and Steel Group (JISCO).

Noranda Aluminium filed for Chapter 11 bankruptcy protection in February and in October announced it had received court approval for the sale of its Gramercy alumina refinery in Louisiana and the St Ann bauxite mine in Jamaica, for a total of US$24.43M to New Day Aluminium. In 2017, further sales activity is expected as companies take advantage of low prices.

Ground & precipitated calcium carbonate 

The overall market for ground (GCC) and precipitated (PCC) calcium carbonate continued to grow in 2016 but there were some pronounced differences between markets and regions. Overall consumption in North America expanded but the European market continued to contract. In Asia, use of GCC fell but consumption of PCC rose. Changes in the overall market mirrored those of economic trends; this is because the products in which calcium carbonate is used are closely linked to levels of consumer demand.

Paper remained by far the most important market for both forms in 2016, but the industry still suffered from overcapacity in most regions and consequently low profit margins. Capacity closures continued in North America and Europe, reducing the market for filler grade GCC and PCC. Mineral suppliers have responded by developing products that reduce the operating costs of papermakers. The major calcium carbonate producers Imerys, Omya and Minerals Technologies (MTI) have all developed PCC products for paper that reduce the amount required but retain performance. All three companies continued to roll out these products around the world, particularly in China, during the year.

The global market for mineral fillers in plastics continued to expand, especially in China where the consumption of calcium carbonate in this sector is estimated at over 10Mtpy. Particular areas of growth in the global market were in PVC used in housing and automobiles, especially in Asia and North America.

The Chinese calcium carbonate market remains the largest of any region but domestic GCC capacity declined in 2015 and 2016 following years of growth. Reasons for this include overcapacity for low-grade products, depletion of high-grade limestone deposits and a slowdown in the national economy. The industry is undergoing consolidation after years of rapid expansion as provincial governments are closing small-scale producers and regrouping them into larger enterprises. An example of this took place in Zhejiang province where over 340 GCC producers were reorganised into 13 larger companies, including Jinding Powder and Huayuan Chemical. Omya and MTI are continuing to open PCC plants at paper mills in China as the move away from using domestic kaolin as filler continues.

Imerys' Carbonates division saw an increase in sales in North America and South East Asia. Sales in the paper market continued to decline, particularly in Europe. The company set up the FiberLean® joint venture with Omya to promote research and development on microfibrillated cellulose (MFC) for use in multiple applications and markets. This included the setting up of an 8,000tpy plant. Imerys also continued to integrate the four PCC plants purchased from Solvay towards the end of 2015. These plants make fine and ultra-fine products and enabled the company to increase its presence in speciality applications in the automotive, construction and consumer goods markets.

In China, Omya reached an agreement with Shandong Tranlin Paper for the construction of a 150,000tpy PCC plant, scheduled to open in 2017. The plant will use Omya's Multifill® technology, which can reduce filler loadings by up to 18%. Omya also indicated it intended to place more emphasis on the small but valuable market for food-grade GCC, particularly in Asia and the Middle East.

MTI now has 24 agreements with paper mills for the supply of its Fulfill® PCC filler technology, introduced in 2010. This technology reduces the amount of PCC filler required while maintaining the brightness and strength of the finished product. The company opened a 100,000tpy capacity PCC satellite plant in China for the Sun Paper Group during 2016.

SOURCE Roskill Information Services