Investment needed to avoid ilmenite shortage

Beach Minerals

Sep 22 2016

Investment needed to avoid ilmenite shortage

Published: Wednesday, 14 September 2016

Shrinking output from China has resulted in higher imports of TiO2 feedstocks while increased activity in pigments could result in higher demand and prices for ilmenite and rutile. Additional supply sources are needed as sulphate ilmenite inventory is being worked off.

Unless new supply sources are created for sulphate ilmenite, the market will face a shortage by 2018, according to the latest global update from independent research firm TZ Minerals International (TZMI).

In its quarterly market update for the titanium and zircon value chain, TZMI said that there are no new significant sulphate ilmenite mines under construction or ready to come on stream.

Based on long lead times for the completion of studies and construction of new supply together with limited funding options available to miners, TZMI predicts that juniors will be unable to fill the necessary supply gap.

“After a number of years of supply surpluses, excess sulphate ilmenite inventory is now being worked off and the market is heading into a period of sustained shortages from as early as 2018 without supply from new mines,” the report outlines.

Leading zircon and rutile producer Iluka Resources also said earlier this year that the capital expenditure required to sustain the industry is “large and imminent” at $1.6bn, with industry profitability insufficient to support required investment.

TiO2 momentum

Increased activity and output ramp up at titanium dioxide (TiO2) pigment plants has resulted in positive sentiment in the feedstock market, both for ilmenite and rutile.

Prices in China for domestic ilmenite have now seen a 50% increase since the lows seen in Q1, while average ilmenite prices from elsewhere have also seen price increases.

However, while year-on-year (y-o-y) demand for pigments grew by around 9% in Q1 and 7% in Q2, it remains to be seen how pigment producers in the Northern Hemisphere will respond to the seasonal downturn during the winter months.

Should producers keep momentum going and maintain higher production levels in Q4 in anticipation of higher demand, feedstock producers could see an uptick in prices and demand.

Shrinking supply

Additionally, TZMI anticipates global demand for chloride titanium feedstocks to increase by 4% between 2015 and 2020 while supply is expected to fall 20% y-o-y in 2016.

For sulphate ilmenite, prices have been stimulated as a result of lower magnetite output in China.

Sulphate ilmenite is produced as a byproduct of magnetite, the mining of which takes place in conjunction with iron ore production. However, the slump in iron ore import prices on the back of higher imports has made magnetite mining uneconomical.

Sources told IM that this has affected the production of the 3m tpa ilmenite byproduct from the industry and created a need for higher ilmenite imports.

One industry participant told IM that while Chinese ilmenite prices are up 50%, they would need to increase by at least another 50% to justify mining activity at current iron ore price levels.

Despite recent prices movement in both ilmenite and rutile feedstocks, one mineral sands producer expressed concern that prices are still not at high enough levels to validate long term investment into new feedstock supply sources.

“Macro drivers for the industry all look positive for supply and demand but more investment is needed to keep production going,” the producer told IM. “This happened before when there was a race to supply which was not positive for the industry and resulted in some substitution.”

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