Demand for zirconium silicate likely to increase
----Interview with Wenzhen Wu
General Manager
Zhangzhou Jiulongjiang Ceramic Raw Material Co., Ltd.
- Zhangzhou Jiulongjiang Ceramic raw material Co., Ltd has become one of the major zirconium silicate producers in China after over two decades’ development. The company almost completed the transformation from a cost-oriented company to the technology innovation-oriented company, and also has accumulated profound experiences in nanometer zirconium silicate production. With the annual production capacity of 50,000t and a monthly output of about 2,000t, the company's zirconium silicate products are sold to top-tier ceramic and sanitary ware industries in domestic market and exported to enterprises in the US and Japan.
- Asian Metal: Welcome to our interview, Mr. Wu, please introduce your company briefly first.
- Mr. Wu: Zhangzhou Jiulongjiang Ceramic Raw Materials Co., Ltd. was established more than 20 years ago. After more than 20 years of development, it has become one of the major manufacturers of zirconium silicate industry in China. The company has basically completed the transformation from a cost-oriented to a technology innovation-oriented enterprise. During the period, we gained deep experiences in nano-scale zirconium silicate technology and production. The current designed annual production capacity of our zirconium silicate production line is 50,000 tons, and the current output is around 2,000 tons. Our products, including but not limited to zirconium silicate 60-63%min and 64%min, are mainly supplied to domestic ceramic and sanitary ware companies and exported to companies in the United States, Japan and other countries.
- Asian Metal: The demand for zirconium silicate mainly comes from ceramic and sanitary ware plants, could you review the demand performance and its background in the first half of 2023?
- Mr. Wu: Since the beginning of the year, downstream consumers maintained positive attitudes after the epidemic was controlled. The sales volume in the first half of 2023 is not much different from last year. However, since the third quarter, suppressed by the sharp drop in demand from ceramic factories, the sales volume of zirconium silicate has almost halved compared with the previous quarter. Overall, the demand for high-grade zirconium silicate 64%min and above has declined significantly, while the demand for mid-grade zirconium silicate 60-63%min has increased. Due to cost considerations, downstream clients, when using zirconium silicate, prefer functionality and cost-effectiveness rather than brands which include Iluka and Tronox. For example, the sales volume of zirconium silicate 60%min in September increased slightly by about 10% compared with July-August. The current output of zirconium silicate 60%min is 400 tons a month, an increase of about half compared with the first half of the year. While the high-grade zirconium silicate 64% min sales dropped from 1,000 tons to about 700 tons. The main reason for the poor market performance is that the inventory of finished products and raw materials of downstream ceramic sanitary ware companies, due to the downturn in the real estate market, has exploded, resulting in many ceramic factories suspending production and unsold inventory. For example, the clients who normally purchase nearly 32 tones of zirconium silicate each time, only purchased about 5 tons at a time since the third quarter because they mainly consume their raw material inventories. Secondly, the Universiade in Sichuan in August caused Sichuan ceramic factories to suspend production; coupled with the high temperature in the third quarter which caused reduced indoor decoration or even shutdowns, and the typhoon in Fujian, the ceramic factories were flooded and other reasons, resulted in a halved reduction of zirconium silicate demand.
- Asian Metal: Under the gloomy real estate industry, clients adjusted their requirements for products, and how did you cope with the change in customers’ requirements from the perspective of product category and quality?
- Mr. Wu: As some regular clients who used zirconium silicate 64%min asked for lower grade like 60%min to reduce their production cost, we increased the output of middle grade zirconium silicate 60-63%min. Even for 60-63%min, we’re committed to providing the best quality. There are some zirconium silicate products with Ti 2%max or some recycled zirconium silicate with whiteness ranging from 60-70 in the market and the profits of these kinds of products are about RMB1,000-1,500/t (USD137-205/t). But we refused to use casting-level zircon sand or recycled zircon sand for production because we still insisted on the content of tatinium to be controlled under 0.5% in spite of the high prices of raw material and meager profit to repay our clients' trust and support!
- Asian Metal: Chinese government released some positive policies in September to pump up the real estate industry, did the zirconium silicate industry see any change? How do you see the zirconium silicate demand and price trend in Q4?
- Mr Wu: Personally, I believe that the active real estate policies introduced by the government can only be said to be short-lived. The current real estate policy is mainly focused on destocking, and the new increase in real estate is small. The effect of the new policy on new developments in the real estate market would definitely take time and needs to be transmitted. The overall zirconium silicate market demand would still decrease in the fourth quarter, and one-third to half of our clients in Guangdong are preparing to stop production after the National Day. At the same time, like other zirconium silicate producers, we remain cautious in purchasing raw materials now for fear of price decline. Therefore, the production of zirconium silicate would also reduce. It is expected that the prices of zirconium silicate 64%min would hover at around RMB15,000-16,000/t in the fourth quarter.
- Asian Metal: As the key factor to influence the prices of zirconium silicate, how do you see the price trend of zircon sand in China in Q4?
- Mr. Wu: In the fourth quarter, the prices of zircon sand in the Chinese market is expected to be weakly stable. Due to high prices of intermediate zircon ore from international suppliers, Chinese producers don't want to take risks to replenish the raw material, leading to shortening stocks. The reduced supply of zircon sand would prevent the zirconium silicate prices from fluctuating significantly. Generally, the profit value of a dressing plant is about 7-8%. Assuming that the current price of zircon sand 65%min is about RMB13,000/t, if it drops by about RMB1,000/t, which is equivalent to a drop of 7-8%, the dressing plant would not suspend production even their profits are poor because suspension is also a loss. For consumers, for instance us, who purchase zircon sand directly to produce zirconium silicate, they can purchase the raw material from dressing plants at prices acceptable to both sides. Therefore, the zircon sand market price is expected to be weakly stable with a slight decline of RMB500/t, I think it is acceptable to the dressing plants.
- Asian Metal: The current prices of zircon sand from international suppliers already became about RMB3,000/t (USD411/t) higher than those of Chinese producers, how about you see the big price gap?
- Mr. Wu: First of all, the US dollar interest rate hike has led to global price increases, resulting in increased production costs, so the international suppliers' prices would not be low in the fourth quarter. Secondly, large companies maximize their profits in terms of sales strategies. The benefits brought by current prices are higher than those brought by price cuts. Iluka has sufficient cash flow, so it can insist on no price reduction or less price reduction. They can produce and accumulate inventory first. When inventory accumulates to a certain level and the market is really bad, they would stop production, we have similar experience in 2015. I think there is a high probability that international suppliers would symbolically lower their prices by USD100-200/t in the fourth quarter, but there would not be a significant price reduction.
- Asian Metal: Do you think the market would turn better in 2024?
- Mr. Wu: I foresee that the demand for zirconium silicate is likely to increase slightly by 5-10% in 2024. If only a few ceramic tile factories use low grade zirconium silicate this year, the corresponding ceramic tile prices would have some advantages. But this year, most downstream ceramic tile factories are using low grade zirconium silicate, resulting in a non-existent price advantage for ceramic tile factories. So the next step for ceramic tile factories is to improve the product quality to stimulate the use of zirconium silicate. In addition, the government might have other policies to stimulate the real estate market, so it is expected that the demand for zirconium silicate is expected to increase in 2024. In addition, zirconium silicate companies can improve product quality and stability. When the exchange rate drops and the prices of zircon sand stand relatively low, they can export their products, which I think is worthy of consideration.
- Asian Metal: what’s the new plan of your company?
- Mr.Wu: We will keep putting more endeavors to improve our producing technique and providing multiple functional zirconium silicate products to our clients. We expect to enhance and improve our market share.
