Iluka Resources, an Australian mining company, recently released its third-quarter report, revealing a decline in the production and sales of zircon, rutile, and synthetic rutile. The company attributes these setbacks to global uncertainty, subdued economic activity, and market weakness in China's property sector.
Challenges in the Zircon Market
The zircon market has been facing headwinds due to ongoing global uncertainty and a sluggish China property market. Despite recent monetary policy changes in China, which aimed to stimulate the real estate sector, the impact on the domestic ceramic market has been limited. Additionally, overall industrial activity in China has remained subdued, resulting in low buying activity in various zircon segments.
European Demand and Ceramic Tile Production
During the third quarter, European demand for zircon saw a slight decline as some industries extended their summer break for maintenance purposes. Although ceramic tile production resumed in September, it is expected to operate at reduced rates.
Growth Prospects in India
On a positive note, the Indian real estate sector has exhibited strong growth throughout the year, recovering from setbacks experienced during the pandemic. This market presents a promising growth prospect for zircon sales, particularly in the ceramics market. However, industrial activity in other Asian economies remains subdued, reflecting weak export markets.
Stable Demand in the United States
Iluka Resources reported stable demand in the United States, with growth observed in construction spending and manufacturing activity. Inventory levels throughout the value chain remain low as consumers of zircon and related products, such as opacifiers, show reluctance to hold or build stocks.
Moreover, the weighted average zircon premium and standard price for Q3 2023, excluding zircon-in-concentrate, stood at US$2,062 per ton.
Mining Operations in Australia
In Q3 2023, Iluka Resources achieved significant progress in its mining operations. At the Jacinth-Ambrosia mine in South Australia, the company produced 101,000 metric tons of heavy mineral concentrate, surpassing the 59,000 tons mined in Q2 2023. This increase in production can be attributed to the mining of higher grade ore in line with the planned mining sequence.
However, in Western Australia, the Cataby mine reported a decrease in production during the quarter. The mine produced 114,000 tons of heavy mineral concentrate compared to 144,000 tons in the previous quarter. This decline was expected as lower grade ore was mined during this period, aligning with the company's mining plan.
Synthetic Rutile Production
Iluka's Kilns Performance in Q3
During Q3, both SR1 and SR2 kilns at Iluka were operational and produced a total of 81,000 tons of synthetic rutile. Although this output slightly decreased from the 87,000 tons in Q2 2023, it was mainly due to a two-week planned maintenance outage of the SR1 kiln in July.
It should be noted that production at the SR1 kiln will be paused from Q4 2023, coinciding with the planned MMO (major maintenance outage) at the SR2 kiln. This maintenance will take four months to complete. This strategic decision will not only allow Iluka to reduce inventories of synthetic rutile but also make use of the existing workforce to carry out the SR2 maintenance effectively.
Both kilns were taken offline safely in early October and are scheduled to restart in late January 2024.
Titanium Dioxide Feedstocks Market
In the titanium dioxide pigment market, European chloride plants that were previously idled have resumed production. However, production rates currently remain below seasonal norms as chloride pigment producers strive to align supply with demand. Interestingly, downstream pigment prices in the U.S. and Europe have managed to remain stable despite the lower demand environment. This stability can be attributed to producers effectively matching their production levels with demand in the market.
China, on the other hand, has witnessed three consecutive pigment price increases since August. These hikes come as a result of inflationary pressures, driving producers to seek higher prices to counterbalance rising input costs. Additionally, the increasing infrastructure spending by emerging economies like India has fueled continued growth in demand for rutile in the welding market. Moreover, the titanium sponge market is experiencing robust demand due to increased activity in the aerospace industry and limited supply from Russia.
In Q3 2023, the price of rutile stood at US$1,908 per ton, with the clarification that Iluka's sales of rutile are predominantly targeted towards the welding market. Synthetic rutile, on the other hand, was priced at US$1,262 per ton.
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