Rutile market sees tight supply
----Interview with jinzhuo
General Manager
Leizhou Yuanjia Mining Co., Ltd.
- Established in 1999, Leizhou Yuanjia Mining Co., Ltd. acts as a zirconium-titanium mining, processing and trading enterprise whose business covers processing and sales of zircon, titanium concentrate, iron concentrate, rutile, monazite, tin concentrate, tungsten concentrate, bauxite, manganese ore, magnetic powder, etc. The company's main products include rutile, titanium concentrate and zircon sand, and it is one of the largest rutile producers in China.
- Asian Metal: Hello Mr. Zhuo, welcome to the interview by Asian Metal. Please give us a background about your company first.
- Mr. Zhuo: Our company was established in 1999 and our main products are rutile, titanium concentrate and zircon sand. With an annual processing capacity of 90,000 tons and a total investment of nearly 51 million yuan, our rutile output ranks the first in China with the output of about 21,000 tons in 2021 and about 27,000 tons in 2022. About 80% of our rutile product is rutile 90%min, and that of rutile 95%min occupies around 10%, the rest 10% are rutiles with other grades.
- Asian Metal: What is the purity of rutile in the zirconium-titanium crude ore? How about the cost of ore processing?
- Zhuo: Generally speaking, the purity of rutile in zirconium-titanium crude ore is about 10%, and that in some high grade crude ore could reach 40-50%. The processing cost of our rutile is about RMB300/t (USD43/t), that of titanium concentrate is about RMB100/t (USD14/t), and that of zirconium sand is about RMB500/t (USD72/t).
- Asian Metal: What are the main reasons for the tight supply in rutile market in 2022?
- Zhuo: Discouraged by the weak demand for zircon sand, the amount of imported zirconium-titanium crude ore by Chinese processing plants decreased by around 15%, resulting in a corresponding decrease in rutile production. Since China mainly replies on the import for the raw materials of rutile, exchange rate fluctuations will affect the import of crude ore to some extent, making the supply of rutile fluctuate accordingly. Under the condition that the downstream consumption volume remains stable and the prices from overseas suppliers of crude ore remains stable, if the RMB continues to depreciate, the import cost of crude ore will increase, and most importers lack interest in importing. As a result, the import volume of crude ore will decrease, and the rutile output will decrease accordingly, resulting in tight supply in the spot market. From the beginning of the third quarter, the depreciation of the RMB further increased the import cost, so most Chinese processing plants continued to reduce the import volume of crude ore and the domestic rutile supply remained at a low level in the rest of the year. Our imported volume for crude ore in H2, 2022 also decreased by at least 10% compared with that in H1,2022.
- Asian Metal: What are the main reasons for increasing prices in Chinese rutile market in H1, 2022?
- Zhuo: There are two main reasons. First, from the perspective of supply, the reduction of import volume of crude ore leads to the reduction of rutile production volume, and the market supply remains tight, so most suppliers stay in no hurry to sell and continue to raise their prices. Second, from the perspective of demand, titanium sponge industry acts as the main consumption area of rutile, accounting for about 90%. In addition, high-end wire electrode industry also needs to consume a certain amount of rutile 95%min, accounting for about 10%. The Russian-Ukrainian conflict led to increased demand for titanium sponge and titanium mills from end users, especially the military industry. Active orders from downstream consumers brought strong demand to titanium sponge industry and the titanium sponge enterprises maintained strong demand for rutile, which further encouraged rutile prices to increase. Our orders remained full with the sale volume reaching 25,000t in 2022, up by around 10% YoY.
- Asian Metal: Why did the Chinese rutile market remain quiet in Q3, 2022 and rebound in Q4?
- Zhuo: In the third quarter, the domestic market suffered from COVID-19, and the production and logistics of downstream factories in some provinces were blocked, so the consumption volume of rutile decreased accordingly. At the same time, most end users in the export market began their summer holidays and continued to postpone their purchases, resulting in rare export orders, so the Chinese rutile market remained quiet. Entering the fourth quarter, as most consumers came back to the market and rebuilt stocks with tight supply in the spot market, the mainstream prices for Chinese rutile market rebounded.
- Asian Metal: Since the tupply keeps tight, why did the market see firm prices in Q1, 2023? Do you think the prices would remain firm in Q2?
- Zhuo: During the Spring Festival holiday, most of the domestic factories left the market since mid January and the supply of rutile declined. At the same time, most consumers built stocks before the holiday. These are the two reasons that supported the prices to remain strong. Due to the tight supply of raw materials, our monthly production dropped to 1,000 tons currently and would probably recover to 1,500-2,000 tons by the end of the second quarter, so we think prices will continue to rise slightly.
- Asian Metal:What are the differences between natural rutile products and artificial rutile products? Will artificial rutile become an alternative of natural rutile?
- Zhuo: The production of artificial rutile uses acid to remove iron during titanium concentration. This method has obvious cost advantage in the production of chlorinated titanium dioxide, titanium tetrachloride, titanium sponge and enamel products, electrode skin and artificial rutile yellow pigment. However, from the feedback from the end users, artificial rutile cannot completely replace natural rutile due to differences in impurity elements and production methods. Most downstream customers will flexibly adjust the consumption ratio according to their own requirements for product quality and cost control.
