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Pricing pressures and increasing globalization are two trends that will likely continue into the foreseeable future.
Like the rest of the manufacturing industry, materials suppliers have been dealing with the challenges of high energy, transportation and labor costs, as well as increasing global competition. Regions rich in raw material resources, such as China, Turkey and Russia, have begun to pay more attention to quality, and ceramic and glass manufacturers have continued to place more emphasis on price. These two factors combined have put increasing pressure on domestic suppliers to keep prices low and offer more value-added products and services. While consolidation in the materials industry has slowed, additional mergers are possible in the future if domestic suppliers are squeezed out of the market.
Although the current global supply situation might provide ceramic and glass manufacturers with short-term pricing benefits, it could lead to longer-term price increases and a reduction in services and product offerings if a balance is not achieved. According to Peter W. Harben, a consultant specializing in industrial minerals, manufacturers must focus on value to ensure a reliable supply of materials in the future.
"The global availability of materials with increasingly high quality provides a significant opportunity for today's manufacturers as they continue to look for ways to keep manufacturing costs low. However, many of today's manufacturers are in a short-term mindset and are focusing exclusively on price, and this will hurt the industry in the long run. Companies really need to look closely at the value being provided by their suppliers and focus on establishing relationships that will help them compete longer term," Harben says.
Following are some of the recent trends in a few specific materials consumed in the ceramic, glass and related industries.
AbrasivesEstimated production of regular-grade fused aluminum oxide in 2004 was 20,000 tons with an estimated value of $6.5 million. This was about the same weight and about 16% more in value compared with 2003 regular-grade fused aluminum oxide production. The total value of fused aluminum oxide abrasive grain consumed in the U.S. was estimated to be $57 million in 2004. Much of this amount came from imports. During 2004, imports of crude fused aluminum oxide were received from 13 countries and increased by 47% to 181,000 tons valued at $50.3 million compared with those of 2003, and imports of ground and refined fused aluminum oxide were received from 22 countries and increased by 26% to 51,200 tons valued at $47.8 million. Compared with 2003, crude imports from China increased by 62%, while imports from Canada and Venezuela increased only by 5% and 8%, respectively. Germany, Brazil, Austria and Canada provided 20%, 18%, 13% and 10%, respectively, of the ground and refined material.
U.S. silicon carbide production increased about 10% during 2004 to an estimated 35,000 tons, and the value of production increased about 28% to an estimated $21.5 million. The total value of silicon carbide consumed in the U.S. was estimated to be more than $124 million in 2004. The U.S. imported crude silicon carbide from eight countries and imported ground and refined silicon carbide from 21 countries. Imports of crude silicon carbide increased by 18% during the year to 163,000 tons valued at $69.3 million. Imports of silicon carbide in ground or refined form increased 49% to 45,300 tons valued at $49.9 million. China accounted for 57% of the crude silicon carbide imports and 36% of the ground and refined silicon carbide. However, a large part of the imports from China reportedly included metallurgical-grade material.
Cheaper imports and higher domestic costs will continue to challenge U.S. producers of fused aluminum oxide and silicon carbide to maintain market share. Competition from developing nations, especially China, will probably lead to further decreases in domestic output. China has become a dominant force in both fused aluminum oxide and silicon carbide in recent years.
BoronU.S. production of boron minerals remained flat in 2004 at 562,000 tons, while apparent consumption dropped by 4% to an estimated 509,000 tons. Imports of borax and colemanite were lower, while imports of boric acid increased 10% to 52,000 tons, and imports of ulexite rose 34% to 122,000 tons.
A leading indicator of demand for refined borates was the strong housing market. Domestic market sectors for boron minerals and chemicals were fiberglass, 64%; borosilicate glass, 6%; fire retardants, 4%; soaps and detergents, 4%; agriculture, 3%; frits and ceramics, 3%; and other uses, 16%. The second leading producing company in the U.S. also produced specialty borates in Tuscany, Italy, where production was curtailed in 2002 because of a lack of colemanite feedstock from Turkey, which was using the colemanite to make value-added derivatives for export. The Italian plant was able to continue producing high-purity boric acid in 2004 by importing boron compounds. Exported U.S. borate materials competed with borax, boric acid, colemanite and ulexite primarily from Turkey, the leading producer of boron ore in the world.
London, UK-based Rio Tinto plc, which owns U.S. Borax Inc. in Valencia, Calif., reported that 2004 production of borates was slightly above the corresponding periods of 2003, reflecting improvement in some end use markets. The company said that demand remained robust in the first half of 2005.
ClaysU.S. production of clays in 2004 (including ball clay, bentonite, common clay and shale, fire clay, fuller's earth, and kaolin) rose 18% to 49 million tons valued at $1.7 billion. Major domestic uses for specific clays were estimated as follows: ball clay-31% floor and wall tile, 20% sanitaryware and 49% other uses; bentonite-25% pet waste absorbent, 20% drilling mud, 19% foundry sand bond, 13% iron ore pelletizing and 23% other uses; common clay-55% brick, 19% cement, 16% lightweight aggregate and 10% other uses; fire clay-79% refractories and 21% other uses; fuller's earth-76% absorbent uses and 24% other uses; and kaolin-54% paper, 14% refractories and 32% other uses.
Imports of clays for consumption decreased to an estimated 225,000 tons. The major sources of imported clay were Brazil (kaolin), Canada (bentonite), Mexico (activated clay) and the UK (kaolin). Exports increased to 5.6 million tons. Major markets for exported clays, by descending order of tonnage, were Canada, Japan, Mexico, Finland and Taiwan.
According to Jim Guilinger, founder of the consulting firm World Industrial Minerals, high mining and manufacturing costs and an increasingly global market continue to pressure domestic clay suppliers. As a result, prices are expected to remain steady or even decline in the coming months and years, as suppliers try to remain competitive. However, this situation could lead to further industry consolidation, which could reduce the availability of products and services in the future.
The seriousness of the situation was underscored in recent comments made by Lee Lemke, executive vice president of the China Clay Producers Association, with regard to the Georgia kaolin industry. "There continues to be tremendous pressure on the kaolin industry to keep the industry competitive in the global marketplace. However, high energy costs and rising chemical costs have eroded profitability. In addition, the Georgia kaolin industry is struggling from increasing foreign competition and other competing minerals," he said. "The last five years have been dismal. Profitability has averaged a negative 0.94% for a five-year period with significant losses reported in 2000 and 2001.
"Unfortunately, the kaolin industry in Georgia is not seeing the reinvestment in capital, as assets are shifting to more profitable areas. This redeployment of assets will continue until income numbers reflect an acceptable return on investment," he continued.
Soda AshAccording to a recent study by Roskill Information Services Ltd., consumption of soda ash in chemical manufacturing applications was around 8 million tons in 2004 and is forecast to grow by 2-3% per year.1 The major uses for soda ash are in sodium silicate and sodium tripolyphosphate (STPP) for detergents, which accounted for 5 million tons in 2004. Consumption of soda ash in the production of sodium bicarbonate was around 1.8 million tons in 2004. Demand for sodium bicarbonate is growing at an estimated 3-4% per year and is expected to reach 6-9% per year in China and India.
Roskill notes that in 2004 and 2005, China was a key factor in soda ash pricing around the world. Its position in the Asian market has a direct influence on demand for U.S. exports, currently the main driver of soda ash demand in the U.S. Shortages of both coke and salt in 2004 led to major price increases in China, as well as a reduction in exports to Asia in the second half of that year, thereby enhancing demand for U.S. material and contributing to the worldwide tightening of the market. The shortage of metallurgical coke in China and elsewhere, driven by the requirements of the steel industry, has affected coke availability and prices in Europe, thereby influencing the cost of soda ash production there.
Glass will remain the main market for soda ash in the future, consuming an estimated 16-17 million tons in 2004, and it is forecast to grow at around 3% per year through to 2010, driven more by flat glass (4% per year) than container glass (2% per year). Growth in flat glass has exceeded gross domestic product in recent years because of high demand rates from the world's construction and automotive industries, especially in China and other Asian countries. The more mature western markets are also experiencing growth, however, helped by the growing demand for value-added products, such as solar reflective glass and enhanced security glass. Widespread recycling of cullet is expected to have a direct impact on soda ash consumption in container glass, particularly in mature markets, as the use of cullet reduces the need for raw materials.
Talc and PyrophylliteU.S. suppliers mined an estimated 911,000 tons of talc and pyrophyllite in 2004, up 5% from 2003 levels; however, the amount sold by producers declined slightly to 872,000 tons. Apparent consumption rose slightly to 921,000 tons. Domestically produced ground talc was used in ceramics, 32%; paint, 19%; paper, 16%; roofing, 6%; plastics, 4%; rubber, 2%; cosmetics, 2%; and other applications, 19%. Exports increased by 9% compared with those of 2003. Canada remained the major destination for U.S. talc exports, accounting for about 33% of the tonnage. U.S. imports of talc decreased by 7% compared with those of 2003. In 2004, Canada and China supplied approximately 97% of the imported talc.
Editor's note: The foregoing report, except where noted, is based on information compiled from the U.S. Geological Survey (www.usgs.gov). All units are in metric tons. In most cases, 2004 data were the latest available. Peter Harben can be reached at firstname.lastname@example.org, and Jim Guilinger can be reached at email@example.com. The China Clay Producers Association can be found online at www.kaolin.com.
1. "The Economics of Soda Ash," January 2005, 338 pp. The full report is available for US$4200 from Roskill Information Services Ltd., www.roskill.com.