ONLINE EXCLUSIVE: EXPANDED Raw & Manufactured Materials: 2007 Overview
High operating costs remained a significant challenge for raw material producers in 2005. While companies continued to look for ways to streamline their operations, some of these costs were inevitably passed along to customers in the form of higher prices. According to industrial minerals consultant Jim Guilinger, the situation isn't likely to change any time soon. "Prices have gone up 10% or more over the past couple of years, and they're likely to rise at least another 3-5% per year in the near future," he said.
In addition to higher operating costs, the industry is also facing a shifting supply dynamic. According to Guilinger, countries such as Vietnam and China, which have been key exporters of high-quality, low-cost ceramic raw materials over the past several years, have begun to limit their exports in an effort to meet their own internal demand. As the Asian economy continues to grow at a rapid pace, some raw materials increasingly could be in short supply worldwide. Longer term, however, this situation could help provide new opportunities for raw material producers in other regions, including North America.
Following are some of the recent trends in a few specific materials consumed in the ceramic, glass and related industries.
AbrasivesIn 2005, U.S. plants produced approximately 10,000 metric tons (t) of regular-grade fused aluminum oxide (down 50% from 2004) at an estimated value of $4.9million, and 5000 t of high-purity fused aluminum oxide (unchanged from 2004) at an estimated value of more than $4.14 million. U.S. imports off used aluminum oxide for consumption rose 16% to 276,000 t. China, Venezuela and Canada supplied 85%, 11% and 4%, respectively, of the crude imports. Compared with 2004, crude imports from China increased by 15%, and from Venezuela by 37%, while imports from Canada decreased by61%. Brazil, Germany, Austria, Canada and Italy provided 23%, 22%, 14%, 10% and 10%, respectively, of the ground and refined material. The total U.S. apparent consumption off used aluminum oxide in 2005 was an estimated 232,000 t with an estimated value of$64.4 million. (Comparative figures for 2004 could not be obtained.) Exports off used aluminum oxide rose 6% in 2005 to 14,800 t. Prices for both grades off used aluminum oxide were higher, with the regular-grade rising 13% to $371/t, and the high-purity grade rising 15% to $640/t.
According to the U.S. Census Bureau, U.S. imports of crude fused aluminum oxide for 2006 through the month of May(the latest data available) were 47,200 t valued at $16.6 million, or an average of $353/t. About 71% of the imports came from China, 18% from Venezuela, 5% from France, 5% from Canada and 1%from other countries. This compares to 93,300 tons valued at $28 million, or an average of$300/t, imported in the same period in 2005, with about 87% of the imports from China, 8% from Venezuela, 5% from Canada and less than 1% from other countries.
U.S. imports of refined and ground fused aluminum oxide through May 2006 were 17,000 t valued at $20.7 million, or an average of $1220/t. No U.S. imports of refined and ground fused aluminum oxide were reported for the same period in 2005.
Domestic production of crude silicon carbide had an estimated value of about $22.4 million in 2005, about 4% higher than in 2004. Imports for consumption dropped 5% to 199,000 t, and apparent U.S. consumption also declined, dropping 4% to 222,000 t. Exports declined 12% to 12,200 t. Prices for silicon carbide in the U.S. and Canada likewise dropped by 2%to $600/t. At the 42nd Annual Symposium on Refractories in St. Louis, Mo., in March 2006, sponsored by the St. Louis Section and the Refractory Ceramics Division of the American Ceramic Society, G. Wagner of Saint-Gobain noted that the world wide production capacity of SiC is about 1 million metric tons (Mt), of which roughly 25% is used in refractories/ceramics for applications such as Al reduction cells, torpedo cars, blast furnaces (taphole mixes, troughs and runners) and municipal waste incinerators.1
Total U.S. imports of crude silicon carbide through May 2006 were 64,800 t (up17% from the same period in 2005) valued at $32.8 million (up 17%); imports from China alone were 54,900 t (up 19%) valued at $26.5 million (up 11%). The average price of imported crude silicon carbide in the first five months of 2006, excluding Chinese crude, was $628/t, while the average price of Chinese crude was $484/t. U.S. imports of refined and ground silicon carbide for the same period were 13,900 t (down 37% from the first five months of 2005) valued at $18.6 million (down 27%), or an average of $1342 per ton. During the period, China accounted for 85% of the crude material (up 2%) and 28% of the refined and ground material (down 7%).
Imports and higher operating costs continued to challenge producers off used aluminum oxide and silicon carbide in the U.S. and Canada.
U.S. synthetic diamond production was estimated to be 256 million carats in 2005 (up 2% from 2004) with an estimated value of $257 million (down 0.4%). U.S. imports of all forms of industrial diamond totaled about 286 million carats (up 15%) valued at almost $107million (up 30%), while exports totaled more than 92.5 million carats (up 7%) valued at almost $51.1 million (up 8%). The estimated U.S. apparent consumption of all forms of industrial diamond was up nearly 7% to 441 million carats with an estimated value of$282 million (down2%). Demand for industrial diamond is expected to remain robust in the coming years. Although highway building/repair comprises the largest market, consumption for ceramics used in aerospace and electronics applications will also drive demand, as these sectors are expected to remain strong through 2007.2
Bauxite and AluminaNearly all bauxite consumed in the U.S. in 2005 was imported; of the total, more than 90% was converted to alumina. The total apparent consumption of bauxite and alumina was 2.8 Mt (dry, aluminum equivalent), down 0.4% from 2004. Of the total alumina used, about 90% went to primary aluminum smelters, and the remainder went to nonmetallurgical uses, including abrasives, chemicals and refractories. The annual alumina capacity was 5.75 Mt, with all four Bayer refineries operating during the year.
In the first half of 2006 (the latest data available), 4.24 Mt of crude and dried bauxite were imported, down 14% from the same period in 2004. Exports declined 55% to 10,000 t. Imports of calcined bauxite declined 2% to 163,000 t, while exports declined 26% to 8000 t. Imports of alumina increased 1% to 866,000 t, while exports increased 34% to 784,000 t.
According to Guilinger, China's restrictions on raw material exports have created a shortage of high-quality, refractory-grade bauxite."There's a lot of exploration right now, but no foreseeable solution yet," he said.
At the 42nd Annual Symposium on Refractories, Paul Ormond of Aluchem discussed the economics of alumina for the refractories industry. He noted that the cost of bauxite will continue to increase and said that the challenge for refractory manufacturers is to respond to raw materials price changes in ways that provide the best value to their customers. C. Dusfresne of Cambior described the rejuvenation of Guyanan (South American) bauxite, with a capacity of 390,000 tons per year of calcined material, and discussed the hope of capitalizing on this new resource in the face of uncertainties of the supply of bauxite from China.1
The National Optics Institute (INO) in Quebec City, Quebec, Canada, recently completed a study aimed at identifying market segments and covering issues related to the development of specialty alumina applications. The study, which was prepared for Exploration Orbite VSPA Inc., a Montreal, Quebec-based mining company, identified 29 different specialty alumina applications that benefit from alumina's mechanical, thermal and chemical properties, including its extreme hardness, its resistance to extreme temperatures and its chemical inertia.
For example, the demand for alumina-based nanomaterials for use in high-precision polishing for the manufacture of semiconductors is expected to grow at an annual compound rate of 17.1% in value to reach 5641 tons in 2010, representing a $232 million market.
Alumina can also be incorporated favorably in the production of bioceramics for use in the manufacturing of prostheses and implants, such as dental crowns and knee and hip implants. Bioceramics, 72% of which are constituted of alumina or zircon, represent the largest market segment for advanced ceramics, with $1.5 billion sales in 2005, according to the INO study.
The study also noted that fiber optics coated with sapphire (alumina's crystalline form) could be used in the production of sensors that could operate in extreme chemical or thermal conditions for industrial control or as fibered chirurgical (medical or dental) devices offering more power than conventional fibers. The overall market for fiber optic sensors outside the field of telecommunications is expected to reach $97.3 million in 2011.
Alumina glass could compete with silica-based glass in the fields of "safe" glassware and industrial chemistry glassware because of its higher chemical and thermal resistance. The sub-market of fiber lasers is rapidly expanding, with an average annual growth rate of nearly 50% in 2004-2005. The fiber laser market segment is booming as well, with an average annual growth rate of nearly 50% in 2004-2005. This market represented $123 million in 2005 and has the potential to reach $2.3 billion, albeit in an unspecified timeframe.3
These and other market opportunities are leading to increased exploration of new alumina and bauxite resources. In September 2006, Alcoa received formal environmental approval by the Western Australia government to proceed with the expansion of its Wager up alumina refinery south of Perth. The Wager up expansion plan involves building a third production unit at the refinery and upgrading the existing plant to improve efficiency and environmental outcomes. It would increase alumina production capacity from 2.6 million tons per year (mtpy) to 4.7 mtpy.4
In May 2006, Alcoa World Alumina and Chemicals signed a memorandum of understanding (MOU) with Vietnam National Coal-Minerals Industries Group (Vinacomin) to explore the feasibility of creating a joint venture to develop a bauxite mine and alumina refinery in the Dak Nong Province of Vietnam.5 And in June 2006, Almatis celebrated the official opening of its expanded tabular alumina facility in Qingdao, China.6 Both of these facilities are intended to serve domestic needs in their respective markets; it is unclear how much, if any, of the products produced at these facilities will be exported.
BoronU.S. production of boric oxide contained in minerals and compounds rose 3% in 2005 to 657,000 t valued at $483 million. Apparent U.S. consumption of boron minerals and chemicals rose 22% to 649,000 t, much of which was used in the production of glass by firms in the North Central and Eastern U.S. 65,000 t of boron were imported for consumption in 2005, compared to less than half a ton in 2004. Imports of boric acid remained steady at 49,000 t, while imports of cole manite increased 79% to 98,000 t. Imports of ulexite decreased 36% to 70,000 t. Exports of boric acid rose 64% to 168,000 t, while exports of refined sodium borates fell 76% to 33,000 t. Export figures for cole manite were unavailable.
According to a report from Roskill Information Services, Inc., worldwide boron consumption rose by 4.7% per year between 2001 and 2005, when it reached 1.8 Mt.7 During this period, annual Asian consumption grew by an average of 38%, while that of Europe declined by 9.3% per year. The overall rise in consumption was accompanied by a trend toward the use of more refined products to limit the effects of undesirable impurities.
Eti Mine, Turkey, and Rio Tinto Borax, Argentina and the U.S., dominate the production of borates. Along with the much smaller Bor operation in Russia, these companies accounted for more than 70% of global output in 2005. With borate production limited to only a few countries, movement of beneficiated ores and refined products between countries is substantial. Of particular note has been the rise of Chinese imports, growing from around 50,000 t in 2000 to over 400,000 t in 2005.
According to the Roskill report, world-wide demand is expected to continue to increase over the next five years and will reach 2.1 Mt in 2010, a rise of 3.9%. The manufacture of glass is the most important application for borates, accounting for 55% of world consumption in 2005. In the period to 2010, demand for borates in insulation-grade fiberglass is expected to grow by 3.6% per year, while in textile grade fiberglass, demand for borates is forecast to grow at a slightly lower rate of 2.8% per year.
Global consumption in the ceramics sector rose from 195,000 t in 2001 to 350,000 t in 2005. This rise took place largely in Asia and was driven both by a burgeoning local demand and by the relocation of production capacity from higher-cost regions. Roskill projects that overall world demand for borates in ceramics will grow at an average annual rate of 3.2% to 2010.
ClaysU.S. production of all clays in 2005 was estimated to be about 42 Mt valued at $1.70 billion, which was virtually unchanged from 2004. Apparent consumption rose 3% to 36.9 Mt. Major uses for specific clays were estimated to be as follows: ball clay-35% floor and wall tile (+4% from 2004), 26% sanitaryware (+6%), and 39% other uses (-10%); bentonite-24% foundry sand bond (+5%), 23% absorbents (-2%), 21% drilling mud (+1%), 15% iron ore palletizing (+2%), and 17% other uses (-6%); common clay-58% brick (+3%), 17% cement (-2%), 15% lightweight aggregate (-1%), and 10% other uses (unchanged); fire clay-54% refractories (-25%) and 46% other uses (+24%); fuller's earth-78% absorbent uses (+2%) and 22% other uses (-2%); and kaolin-66% paper (+12%) and 34% other uses (+2%).
Imports for consumption increased 22% to an estimated 320,000 t, with kaolin seeing the most significant rise at 27% to 280,000 t. The major sources of imported clay were Brazil (kaolin), Canada (bentonite), Mexico (activated clay) and the UK (kaolin). Exports decreased 5% to 5.34 Mt. Major markets for exported clays, by descending order of tonnage, were Canada, the Netherlands, Japan, the Republic of Korea, Australia, Mexico and Italy.
According to Guilinger, U.S. companies are exploring new domestic sources of clays, particularly kaolin. However, a shortage of qualified personnel could hamper these efforts in the near term.
Feldspar and Nepheline SyeniteU.S. feldspar production was estimated to have decreased by about 3% in 2005 to 750,000 t valued at $43 million. Exports of feldspar increased by 58% to 15,200 t valued at $2.07 million, and imports increased by 27% to 26,200 t valued at $1.7 million. There was no production of nepheline syenite, and imports of nepheline syenite (from Canada) decreased by 3% to 340,000 t valued at $33.8 million. Apparent consumption of feldspar and nepheline syenite combined was 1.1 Mt. World production of feldspar was 12.9 Mt, slightly higher than in 2004.
Chinese companies have been a major source of feldspar for domestic ceramic use and for other Southeast Asia countries. However, as with bauxite and other minerals, the Chinese government has begun limiting exports of feldspar to ensure that its supplies remain adequate to fulfill its own internal needs. Turkey, which has been a major supplier to European countries, could step in to fill some of the supply gap. However, Guilinger believes that some of the best prospects for new feldspar resources are in North America, particularly in Canada. "With cheap sources of raw materials less readily available from offshore, companies are taking a second look at properties in North America that might not have been economically viable several years ago," he said.
SilicaTotal U.S. production of industrial sand and gravel-often called "silica," "silica sand," and "quartz sand"-increased to 30.6 Mt in 2005 and was the highest production total in the history of the U.S. industry. Compared with 2004, industrials and production increased by 3.5%, and gravel production decreased by 11%. The production increase for silica sand followed several years of increasing demand for many uses, which included ceramics, chemicals, fillers (ground and whole grain), filtration, flat and specialty glass, hydraulic fracturing, recreational applications and roofing granules.
Of the total industrial sand and gravel produced, 35% was consumed as glass-making sand. Sales to container glass manufacturers increased by 9% compared with 2004, while the amount of sand consumed for fiber glass production decreased by 4%, and the amount consumed for flat glass production decreased by 8%.
Exports of industrial sand and gravel in 2005 increased by 63% to 2.9 Mt compared with the amount exported in 2004, and the associated value decreased by 12% to $154 million. The large increase in exports can be attributed mainly to increased demand from Asian and North American markets. Canada was the leading recipient of U.S. exports at 73%.
Imports for the consumption of industrial sand and gravel rose to 711,000 t, which was an increase of 45% compared with 2004. Mexico supplied 54% of the silica imports.
Sales of glass sand in 2006 were expected to vary depending on the market. Growth has been noted in some segments, such as flat and specialty glasses, container glass, fiberglass, and frac sand. Total demand for all glass sand end uses was expected to remain static or possibly exhibit slow growth, probably to the range of 10 to 11 Mt through 2006.
Advanced ceramics, such as silicon nitride and silicon carbide, represent a growing market for silica and silica-based chemicals. Strong demand in the electronics industry should continue to boost sales of high-purity fused silica in the near term.
Soda AshU.S. production of natural soda ash in 2005 was 11 Mt, which was virtually identical with that of 2004. Apparent consumption of soda ash was 6.38 Mt, up 1% from 2004. However, reported consumption was 6.20 Mt, which was virtually unchanged from the previous year's levels. Reported consumption and apparent consumption do not necessarily correspond, because reported consumption is actual sales, whereas apparent consumption is the calculated quantity available for domestic consumption based on balancing supply (production, imports, and inventory adjustments) with external demand (exports).
Glass manufacturing represented about 50% of domestic soda ash consumption, with container glass at 48% (down 1% from 2004), flat glass at 37% (+1%), fiber glass at 9% (unchanged) and specialty glass at 6% (unchanged).
U.S. soda ash exports for 2005 declined 4% to 4.48 Mt, according to the U.S. Census Bureau, with shipments going to 41countries. Regionally, 29% of exported material was shipped to Asia; 27% went to North America and South America, respectively; 10% went to Europe; 3% went to the Middle East and Oceania, respectively; and 1% went to Africa, Central America and the Caribbean, respectively.
Imports of soda ash increased 27% to 8200 t, with 32% of imports coming from the UK, and 25% coming from Mexico. The remainder of imports was from Belgium, China, France, Germany, India, Italy, Japan and Romania.
After surpassing the U.S. as the world's leading soda ash producer for the third consecutive year, China continued to add new capacity and increase existing capacity at several of its plants, despite escalating production costs. China imported a large quantity of fuel to satisfy the energy requirements of many of its energy-intensive industries, one of which was its synthetic soda ash industry. Higher energy costs and the rising cost of importing salt were expected to cause the price of Chinese soda ash to rise in 2006, and that could benefit the U.S. soda ash industry. Although Chinese soda ash consumption appears to be stabilizing, it is unclear how long China will continue to increase production of soda ash. It is also likely that China could limit exports to ensure adequate domestic supplies.
In the U.S., soda ash production is expected to grow by about 0.5% per year, and growth in world demand is forecast to range from 2 to 2.5% per year for the next several years. Asia and South America remain the likeliest areas for increased soda ash consumption in the near future.
Talc and PyrophylliteU.S. production of talc increased 3% in 2005 to 856,000 t valued at $24.4 million, while U.S. apparent consumption increased 4% to 895,000 t. Imports rose 5% to 237,000 t. World production of talc and pyrophyllite increased 0.2% to 8.25 Mt. China was the world's leading producer of talc, followed by the U.S., India, Brazil (crude) and France (crude). The Republic of Korea was the leading producer of pyrophyllite, followed by Japan and Brazil. Brazil, China, France, Japan, the Republic of Korea and the U.S. produced 85% of the world's talc and pyrophyllite in 2005.
In a potentially damaging move for the U.S. industrial talc supply, a Middlesex County Superior Court jury awarded $3million in compensatory damages in November 2006 to a New Jersey widow whose husband, Peter Stanley Hirsch, operated pottery studios in Skillman, Lawrenceville and Lambertville, N.J., before contracting asbestos-related cancer. After a four-week trial, the six-person jury found that R.T. Vanderbilt Co.'s industrial talc was defective and that Hirsch's exposure to Vanderbilt's talc and Georgia-Pacific's joint compound was a substantial cause of his death. R.T. Vanderbilt reported that the jury assessed 50% of the liability to each company. The national toxic tort law firm Levy Phillips & Konigsberg, LLP, which represented the plaintiff, said that Hammill & Gillespie, Inc., which sold the industrial talc to Hirsch, was also found liable. A second phase of the trial was scheduled to begin on November 28, during which punitive damages were being sought against the companies.
According to a statement from R.T. Vanderbilt Co., the jury did not find that Vanderbilt's talc contains asbestos, and the company "remains steadfast in its position that industrial talc does not contain asbestos and that it does not cause mesothelioma or any other form of cancer. Vanderbilt respectfully disagrees with the conclusions reached by the jury in this case and stands by the safety of its talc product. New York talc is one of the most studied minerals in the world-by scientists, government regulators and medical consultants. Over the past 25 years, mineral experts have consistently determined that Vanderbilt's talc does not contain asbestos....R.T. Vanderbilt Company is saddened by the passing of Mr. Hirsch, but does not believe that his exposure to Vanderbilt's talc was a factor in his death."
The effect of the verdict on industrial talc supply and pricing remains to be seen.
ZirconiumDomestic production of milled zircon in 2005 was unchanged from 2004 levels, while production of zirconium oxide decreased by 6% to 19,900 t. Domestic production of zircon concentrate in 2005 decreased by about 6% compared with that of 2004; specific figures were withheld to avoid disclosing company proprietary data.
U.S. exports of zirconium ore and concentrates were 101,000 t, a 47% increase from those of 2004. U.S. imports of zirconium ore and concentrates were 38,200 t, an increase of 8% from the 35,200 t imported in 2004. Australia and South Africa supplied 93% of the imported ores and concentrates.
Global demand for zirconium minerals continued to exceed supply in 2005. The cause of the shortage was the result of several factors, including increased demand, the closure of some zircon-producing mines, and reduced zircon grades at a few mines. China's tremendous economic growth significantly influenced the price and availability of zirconium minerals. Although U.S. list prices of standard-grade zircon decreased, domestic premium-grade zircon prices reflected the increase in global demand.
According to a report in The Sydney Morning Herald, falling grades from traditional supply sources and increased demand drove zircon prices to $995/t in September 2006.8 However, a new mine in South Australia's remote Eucla Basin could help ease global pricing pressures. Iluka and Adelaide Resources recently estimated that their Tripitaka deposit about 100 km northwest of Ceduna, which was discovered in November 2005, contains 1 Mt of heavy minerals, of which 65% is zircon-a grade believed to be a world record for a deposit of its size or greater. In total, the Tripitaka zircon content equates to approximately 650,000 t. Iluka, which is reportedly the world's largest supplier from existing operations, also wholly owns the much bigger Jacinth and Ambrosia deposits, estimated to contain 9.2 Mt of heavy minerals but at a lower zircon count of 48% and in a more remote location. The company reported that zircon demand remained strong in the first half of 2006, while the market continued to be under supplied.
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 except where otherwise noted. In most cases, 2005 data were the latest available. Jim Guilinger can be reached at firstname.lastname@example.org.