Mineral sand prices extend gains into 1Q22

Record high titanium dioxide (TiO2) demand for pigment production continues to exacerbate tight supply of ilmenite and rutile feedstocks, with prices expected to rise further in 2022.

Despite production curtailments owing to electricity supply cuts, Covid-19 lockdowns and environmental controls, demand from the TiO2 pigment industry remained strong in China during the December quarter. Demand for imported ilmenite feedstock remained high, raising prices, Australian mineral sands producer Base Resources said today in its quarterly results.

Ilmenite supply increased from some African, Vietnamese and Chinese domestic producers during 2021 but lagged behind demand. That tight supply is expected to keep global prices at higher levels during the first quarter of this year.

Demand from consumer industries outside China also strengthened during the fourth quarter. Western TiO2 pigment producers sought to increase their output and demand from the welding, consumable and titanium metal sectors rose.

The tightness in supply for high-grade feedstock is expected to continue owing to uncertainties over supply from major producers, including Iluka, Tronox and Rio Tinto. Declining ore grades at Richards Bay Minerals in South Africa require investment from Rio Tinto, but protest and violence at the site in recent years have disrupted production, including over the summer, and the expansion is on hold.

Bulk freight costs to China retreated from the highs during the quarter but remain volatile, and they are expected to continue driving ilmenite prices "for the foreseeable future", Base said. The company has secured "substantial price increases" for the first quarter.

A major rutile shipment the company had scheduled for December 2021 was postponed to January 2022 owing to delays with the customer's charter vessel, Base said, affecting its fourth-quarter reported sales.

Base reported ilmenite production of 84,000t in the fourth quarter, up from 78,500t a year earlier. Rutile production was little changed at 18,400t, compared with 18,200t in the fourth quarter of 2020, and zircon production totalled 6,400t from 6,700t previously. Base sold 130,000t of ilmenite in the fourth quarter, up from 53,800t, with rutile sales down at 11,600t from 12,000t and zircon sales at 6,200t from 6,400t a year earlier.

Ireland-based Kenmare Resources similarly reported strong demand, with record sales volumes for 2021. Global ilmenite supply increased primarily from Kenmare and producers in China and Norway, the company noted, and there was an increase in exports of low-quality ilmenite-bearing concentrates from other producers in Mozambique to China. But the increase in supply was not sufficient to meet higher demand. Major global pigment producers ran at high utilisation rates to meet growing demand, and pigment production capacity in China continued to grow. Demand for ilmenite was also lifted by a recovering titanium metal market.

Demand for Kenmare's ilmenite exceeded its ability to supply customers. The company's average received prices climbed by 13pc from the third quarter. "This pricing momentum has continued into 2022, driven by demand for Kenmare products and low ilmenite inventories in the supply chain," the company said.

The ongoing shortage in the rutile market has prompted zircon producer PYX Resources to start separating rutile as a by-product of the zircon output at its Mandiri deposit in Indonesia. The company increased the production capacity at its mineral separation plant in November 2021 to 24,000 t/yr from 18,000 t/yr.

PYX expects the rutile market to continue its fast growth from increased usage in the high-tech and automotive markets, like zircon. It also plans to start producing ilmenite and leucoxene in the future. Further planned expansions will take its capacity to 48,000 t/yr over the next five years.

Tight supply also continues to lift prices on the zircon market. Demand remains strong across all downstream industries and regions, Base reported. Limited supply and minimal inventories in the supply chain are pushing up prices despite the ongoing uncertainty in China and seasonally lower demand over the winter. Zircon prices in Base's fourth-quarter contracts were $600/t higher than in the third quarter and prices have been slightly higher for the first quarter.

Kenmare noted that zircon demand accelerated during the second half of 2021 as major economies continued to recover from the lifting of Covid-19 restrictions while significant supply disruptions persisted, resulting in consecutive price increases during the second, third and fourth quarters. That momentum has continued into 2022, with prices rising further during the first quarter.

By Nicole Willing