While these trends have caused additional consolidation and plant closures among North American and European suppliers, Jim Guilinger, president of the consulting firm World Industrial Minerals (Arvada, Colo.), believes that access to a global supply chain is generally a good thing.
"The industry has increasingly been demanding higher quality materials at a lower cost, and at some point, something has to give," he says. "Overall, the global availability of many raw and manufactured materials will help keep prices down while forcing continued improvements in both quality and service from all suppliers. As a result, U.S. ceramic and glass manufacturers will be better able to compete in the worldwide market."
Whether that is true remains to be seen. However, there is no doubt that the materials industry will become even more competitive in the coming years. Following are some of the recent trends in some specific materials consumed in the ceramic, glass and related industries, as well as some future indicators.
U.S. imports of refined and ground fused aluminum oxide through August 2004 reached 32,200 tons (+3.9% from the same period in 2003) valued at $29.1 million (+13.7%), or an average of $902 per ton (+9.3%). The top five sources of the refined and ground imports were Germany (19%), Brazil (15%), Austria (13%), Venezuela (12%) and Canada (9%), with China coming in at only 8%-possibly due to a heavier emphasis on crude exports. (In the same period a year earlier, China accounted for 38% of refined and ground imports.) Guilinger notes that increased demand in China for some materials could also explain this shift. "As China's economy improves, it has begun consuming more of its materials domestically and focusing less on exports," he says.
U.S. exports of fused aluminum oxide through August 2004 were 9450 tons (+24%) valued at $27.5 million (+29.7%), or $2910 per ton (+4.3%). Germany received 30% of the exports that were shipped; Canada, 23%; Mexico, 18%; Japan, 9%; the Republic of Korea, 8%; and others 12%.
Silicon carbide production figures for the first three quarters of 2004 could not be obtained. However, total U.S. imports of crude silicon carbide for the year through August 2004 were up 27.7% to 105,000 tons valued at $42.2 million, while China's share was down 17.3% to 57,900 tons valued at $24.4 million. The average price of imported crude silicon carbide, excluding Chinese crude, was $375 per ton, a decline of 37.2% from the same period a year earlier; the average price of Chinese crude was $421 per ton, an increase of 39.9%. U.S. imports of refined and ground silicon carbide for the same period were 26,200 tons (+20.7%) valued at $30.4 million (+40.7%), or an average of $1160 per ton (+16.5%). During the period, China accounted for 55% of the crude material (-30%) and 31% of the refined and ground material (-12%).
U.S. exports of crude silicon carbide through August 2004 were reported to be 2510 tons (+146% from the same period in 2003) with a value of $3.31 million (+23%). Exports of refined and ground silicon carbide were 7710 tons (+1.5%) valued at $6.48 million (+27.1%). About 97% of the crude material was shipped to, in decreasing order, Norway, Japan, and Mexico. Most of the refined material went to, in decreasing order, China, Brazil and Venezuela.
Data on industrial diamond for 2004 could not be obtained. U.S. production of synthetic industrial diamond increased 7.8% to 236 million carats in 2003, and imports were also higher (+30.5% to 223 million carats). These increases were fueled by higher demand, with apparent consumption up 21.3% to 398 million carats. However, much of the industrial diamond produced in the U.S. is used in applications outside of the ceramic industry, such as road repair. Industrial diamond created through chemical vapor deposition (known as "CVD diamond") is reportedly finding significant applications in computing, where it is able to function as a semiconductor at much higher speeds and temperatures than silicon.
Although imports of bauxite were 7.7% higher than 2002 levels, they were down 4.3%, 8.1% and 20.2%, respectively, compared to 2001, 2000 and 1999. Imports of alumina dropped 23.6%, following declines of 2.9% and 18.9% in 2002 and 2001, respectively, and a slight (0.3%) increase in 2000. Apparent consumption of bauxite and alumina (in aluminum equivalents) was approximately 3 million tons in 2003, a 4.9% increase from 2002 levels but still 38.4% lower than the 4.9 million tons consumed in the economic boom of 1999.
In the first half of 2004 (Jan-June), imports of crude and dried bauxite were up 26% compared to the same period in 2003 to 4.9 million tons. However, imports of calcined bauxite and alumina were both lower (-14% to 136,000 tons and -28% to 821,000 tons, respectively).
The source of imports has changed very little over the last five years. The majority of the bauxite consumed in the U.S. comes from Guinea (38%), Jamaica (31%) and Brazil (12%), while most of the alumina comes from Australia (61%), Suriname (18%) and Jamaica (9%). World bauxite resources are estimated to be 55 to 75 billion tons, located in South America (33%), Africa (27%), Asia (17%), Oceania (13%) and elsewhere (10%). The U.S. and most other major aluminum-producing countries have essentially inexhaustible subeconomic resources of alumina in materials other than bauxite.
Although a broad indication of future demand could not be obtained, Brush Engineered Materials Inc., based in Cleveland, Ohio, reported that third quarter 2004 sales of its Beryllium Products division ($9 million) were 10% higher than third quarter 2003 sales, and overall sales for the first nine months of the year ($26.5) were up 6% over the same period last year. The company said that the outlook for beryllium products in defense and medical applications remains strong.1
World resources of beryllium have been estimated to be more than 80,000 tons (contained mostly in known nonpegmatite deposits). About 65% of the beryllium resources is concentrated in the U.S.; the Spor Mountain and Gold Hill areas in Utah and the Seward Peninsula area in Alaska account for most of the total.
Despite the lower 2003 export figures, U.S. Borax Inc. reported that demand for boric acid is rising worldwide, partly driven by a growing acceptance that refined boric acid offers significant economic and environmental advantages over raw minerals. Reinforcement fiberglass and ceramic frit producers are increasingly converting from raw mineral feedstock to refined boric acid (or increasing boric acid concentrations) to lower energy use and improve product performance. Demand for boric acid in borosilicate glass is also on the rise.2
According to Guilinger, this increased demand, combined with limited production, is likely to drive prices higher. While suppliers agree that price increases are probably inevitable as their own costs continue to rise, they note that price is only one part of the equation. "By focusing too much on a per ton price, companies often miss the value-added aspect that suppliers can bring to the table," says Miguel Galindo, global business manager - ceramics at Borax Europe Ltd.
For example, Borax is helping tile manufacturers use borates as fluxes to achieve lower-porosity tile at lower firing temperatures, or, in some cases, faster firing cycles and less energy consumption. The company is also helping manufacturers produce large-format wall tile that are 25% thinner than conventional tile-a development that will allow faster firing, less use of glaze and/or body materials, and a savings in transportation/freight because more product can be shipped in the same size container.
Borax is also using its experience in "sustainable development"-generally defined as development that meets the needs of the present generation without compromising the ability of future generations to meet their needs-to help ceramic manufacturers improve their production processes and also capitalize on a valuable marketing strategy.
"We embarked on a sustainable development program four years ago, and we see that there are opportunities for our products to be used in a more sustainable way, not only from the operations side-such as the more efficient use of resources and energy in our mines and processing plants-but also by helping our customers improve their processes," Galindo explains. "For example, ceramic tile is already seen as an environmentally friendly building material because of its durability, but there is an opportunity to enhance that image even further through sound production practices. By working closely with tile manufacturers, we can help them apply sustainable principles in their operations and enhance the marketability of their products."3
U.S. ball clay consumption (including exports) rose 17% to 1.3 million tons. Applications in floor and wall tile rose 3.5% to 409,000 tons (31% of the market). Sanitaryware rose 8.5% to 267,000 tons (20%), while miscellaneous ceramics (including catalysts, electrical porcelain, fiberglass, fine china/dinnerware, glass, mineral wool, roofing granules and other products) increased 36.1% to 230,000 tons (17%), and refractories rose 5.6% to 66,600 tons (5%). Consumption in pottery dropped 9.1% to 21,000 tons (2% of the market).
Consumption of common clay and shale rose slightly (0.4%) to 23.1 million tons, with brick comprising roughly 55% of that amount, or 12.7 million tons. While extruded brick remained flat at 11.3 million tons, consumption for other types of brick dropped slightly (-1.3%) to 1.5 million tons. Applications of common clay and shale in refractories dropped 34.2% to 523,000 tons (2.3% of the market). Applications in ceramics and glass (including pottery and roofing granules) rose 19% to 207,000 tons.
Consumption of fire clay dropped 10.3% to 400,000 tons. While refractory products comprise the largest end use of this material at 79%, most of the decline appeared to be from other products, such as animal feed; lightweight aggregates; ceramics, glass and pottery; and unknown uses. The USGS reported that data for firebrick, block and shape applications were withheld to avoid disclosing proprietary company data; however, consumption in foundry sand, grogs and calcines, kiln furniture, mortar and cement, and miscellaneous refractories rose 15.6% to 317,000 tons.
Kaolin consumption (including exports) dropped 4.1% to 7.68 million tons. The largest applications were paper coatings and fillers at nearly 65% of the total. Ceramic applications in the U.S. rose slightly (0.1%) to an estimated 444,450 tons, with the biggest gain in fine china and dinnerware (+11.3% to 30,500 tons, or 6.9% of total ceramic kaolin consumption). Oil and gas refining catalysts, which are the largest domestic ceramic applications of kaolin, dropped 0.5% to 209,000 tons (53%), while wall and floor tile dropped 1.9% to 61,900 tons (13.9%), and sanitaryware rose 0.1% to 85,300 tons (19.2%). Domestic applications in common and face brick rose 34% to 95,000 tons, while applications in refractories (including firebrick blocks and shapes, grogs and calcines, high alumina brick and specialties, kiln furniture and miscellaneous refractories) dropped 15.8% to 761,000 tons. Exports of kaolin for ceramic applications dropped 25% to 152,000 tons.
While U.S. demand for building products is expected to remain steady in the near future, high energy, labor and transportation costs, along with an increasing trend toward offshoring, is expected to continue to pressure clay suppliers. Guilinger notes that prices will likely remain depressed, as imported clays from Turkey and China become more widely available. While quality continues to be a concern, this is also changing, particularly with regard to China.
"The Chinese are significantly improving their quality control and have begun offering clay materials that are much more competitive on a quality basis," he says.
So far, U.S. suppliers have been able to maintain an edge by offering more customized services and highly skilled engineering support, but this distinction could also become more blurred in the coming years. Although this could force some suppliers out of the market, Guilinger believes that joint ventures among suppliers in different countries will become more prevalent, thereby giving suppliers-and their customers-access to a broader range of resources. Regardless of where the materials are sourced, customization and partnerships between suppliers and manufacturers will continue to be an important part of the clay landscape.
Glass, including containers and insulation for housing and building construction, continued to be the largest end use of feldspar in the U.S. at an estimated 67%. According to the U.S. Department of Commerce, seasonally adjusted shipments of glass containers (excluding imports) rose 4.2% in the first half of 2004 compared to the same period in 2003 to reach 17.6 billion units.4 Glass containers are expected to continue to perform well in higher-end packaging applications, such as wine, beer and specialty foods, where image is a key component of marketability. The domestic construction industry is also expected to remain steady, despite rising interest rates, which could help maintain feldspar usage in tile and vitreous plumbing fixtures. These and other whiteware/pottery applications accounted for much of the remaining feldspar consumption in 2003.
Although continued strong sales of flat panel displays and other LCD products increased demand for indium-tin oxide, the use of indium phosphide for semiconductors was negatively affected by the continued downturn in the world economy. A report of reduced production from mines that produce byproduct indium had a negative impact on the perceived availability of indium from China, which drove world prices up to the highest levels in four years. Although the short-range outlook for indium demand remains attractive, market supply remains questionable with its heavy dependence on the strength of the zinc market. However, recycling efforts, especially in Japan, have done much to offset shortages in supply and to alleviate pricing pressures.
The global refractories industry is the largest market for kyanite and mullite. The steel industry, which is the largest market for refractories, has improved in both Europe and the U.S. in 2004. Companies have also reported significant business activity in the Asia-Pacific region, especially China. Growth in the Chinese market is highly competitive, with hundreds of indigenous refractory producers, some of which have very modern operations. Other industrial trends, such as the need to increase energy efficiency, are also boosting refractory demand, particularly in the glass sector.
According to Sons of Gwalia Ltd., West Perth, Australia, worldwide demand for lithium minerals increased 9.5% in 2003 to 214,000 tons, primarily for applications in the glass, ceramic and metallurgical industries. Most of this growth occurred in the China and other Asian countries. The demand in North America and Europe was flat, and the outlook is for only modest growth. Applications in lithium ion and lithium polymer batteries offer the largest growth potential worldwide.
Over the past decade, the three major producers of lithium minerals-Sons of Gwalia Ltd. in Australia, Tanco in Canada and Bikita Minerals in Zimbabwe-have supplied more than 85% of worldwide demand for minerals. Sons of Gwalia reportedly owns the largest operating high-grade deposit of lithium ore (spodumene) at Greenbushes in Western Australia; however, the company announced possible plans in October 2004 to sell these operations with its Advanced Minerals Business and Gold Assets as part of a debt restructuring effort.5 Bikita operates the largest known high-grade deposit of petalite. The total installed lithium minerals production capacity worldwide is estimated to be 342,000 tons per annum.
According to Roskill Information Services, China supplies approximately 95% of total global demand for rare earths minerals and is now also the world's largest consumer of rare earths, with an estimated demand of 29,500 tons of rare earth oxides in 2003, which is approximately 35% of world demand.6 This represents growth in demand of more than 50% over the past three years. China is likely to increase its share of the processed rare earths market due to the local availability of rare earth ores, the availability of low-priced chemical reagents and its world-class technological and intellectual rare earths infrastructure.
Meanwhile, the apparent demand for rare earths in North America, Europe and Asia has fallen over the past three years. However, this is a reflection of the increase in downstream processing of rare earths in China, where costs are significantly lower than in the rest of the world.
Global demand for rare earths is forecast to rise at a rate of 4-7% per year over the next three to four years; however, prices are unlikely to return to the low levels prevalent at the beginning of the decade within this time. The growth in demand for automotive catalysts remains strong in response to ongoing government legislation to reduce exhaust emissions to increasingly lower levels. In particular, the demand for cerium-based diesel fuel additives developed over the past five years has shown a very high rate of growth. Estimated demand for this application was 5500 tons of rare earth oxides in 2003, compared with 4000 tons in 2000.
China is a major world producer of synthetic soda ash and remains the largest competitor of the U.S. in the Asian soda ash markets. China planned to increase capacity at its Weifang soda ash plant by 600,000 tons in 2004 and to construct a new synthetic soda ash facility at Zhejiang with an annual capacity of 900,000 tons. Reports indicate that China surpassed the U.S. in 2003 as the world's largest soda-ash-producing nation. However, Guilinger notes that much of China's production is consumed domestically, and this is likely to limit its exports in the near future.
Overall global demand for soda ash is expected to grow from 1.5% to 2% annually. Although complete 2004 figures were not available, U.S. demand was expected to be slightly higher than 2003 levels. For the first half of the year (through July 2004), U.S. production was 3% higher, imports were 5% lower, exports were 9% higher, and apparent consumption was 1.1% higher, compared to the same period in 2003.
U.S. exports of talc increased by 8% to 180,000 tons compared with those of 2002. Canada remained the major destination for U.S. talc exports, accounting for about 40% of the tonnage. U.S. imports of talc increased by 8% to 250,000 tons compared with those of 2002. In 2003, Canada, China, and Italy supplied approximately 87% of the imported talc. Although specific data could not be obtained, the U.S. Geological Survey reported that production of pyrophyllite declined slightly from that of 2002, with the majority of consumption (in decreasing order of tonnage) in refractory products, ceramics and paint.
According to Roskill Information Services, demand for zircon could soon be substantially greater than global supply, with the shortfall possibly reaching more than 100,000 tons in 2005.7 A new zircon project in Australia might help alleviate some of the supply issues. Spearheaded by Southern Titanium NL (soon to become Australian Zircon NL), Adelaide, South Australia, the mine is expected to ship approximately 43,000 tons of zircon and other mineral sands each year to ceramic manufacturers around the world, beginning in 2005.8Other new zircon mines are planned for Pooncarie, Australia (BeMaX Resources NL) and the Tiwi Islands (Matilda Minerals).9
However, according to Roskill, some industry observers believe that even if all the planned mineral sands projects come into production over the next ten years, demand will still outstrip supply.7 If zircon production does not increase to meet the expanding demand, prices will continue to rise to a point where consumers in one or more industries may switch to using alternative materials.
The shortage of zircon is not a reflection of the mineral's availability-mineable reserves are sufficient to sustain current levels of output for over 30 years-but is largely a result of the economics of mineral sands production. Zircon is extracted as a co-product or by-product of titanium minerals, the market for which is over-supplied. Global demand for titanium dioxide feedstock thus has a major effect on both the production of zircon and the viability of new mining projects.
World consumption of zircon was about 1 million tons in 2003. With a share of 35%, Europe has long been the principle consuming region, largely a reflection of the sizeable Spanish, Italian and Turkish ceramic industries. That position will be challenged in the future by the strong growth in demand taking place in China, much of it from the rapidly expanding ceramics industry, with China's output of tile growing by more than 20% in 2002.
The last three decades have seen a major shift in the global distribution of zircon production. In the 1970s, Australia accounted for at least 50% of total output and the U.S. some 20-30%. South Africa was then only a very minor producer. Australia's dominance of the industry was reduced in the late 1970s, with the development of the Richards Bay beach sands operation making South Africa the second largest zircon producer worldwide. Today, South Africa and Australia produce approximately the same amount of zircon and account for 80% of total supply.
Prices for zircon sand have been rising since 1999. Since the beginning of 2003, ceramic-grade zircon sand prices have increased by nearly 25% from US$370-400/ton to US$450-500/ton in June 2003, reflecting tight supply. Over the same period, the price for opacifier-grade milled zircon has increased from US$600-620/ton to US$680-720/ton, a rather lower rate of increase, which reflects strong competition between zircon milling companies in the west and their need to remain competitive in an industry facing a strong challenge from China.
According to the Australian brokerage firm GSJB Were, zircon sand prices are expected to rise to US$569 in 2005 before leveling off to US$500 in 2007and 2008.9
Editor's note: The foregoing report, except where noted, is based on information compiled from the U.S. Geological Survey (http://www.usgs.gov ). All units are in metric tons. In most cases, 2003 data were the latest available; however, 2004 and forecast figures were used where they could be obtained.
World Industrial Minerals, an industrial/strategic mineral and chemical consulting business, can be reached at 11541 W. 69th Way, P.O. Box 130, Arvada, CO 80001; (720) 898-4808; fax (720) 898-4810; e-mail JIMRG@worldindustrialminerals.com ; or http://www.worldindustrialminerals.com .