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Mineral sands prices are seen heading higher
Friday, August 31, 2012 by Proactive Investors

Mineral sands prices are headed higher, Jeff Williams former managing director and current advisor of Mineral Deposits Limited (ASX: MDL) told delegates at the Africa Down Under conference today in Perth.

While demand is expected to increase by 3% or more per annum, supply is expected to remain flat as production from existing mines decline while new titanium and zircon projects that come on stream do little more than make up for the shortfall from existing mines.

“This supply tightness has emerged in recent years due to reduced production from existing mines and a lack of new high quality capital efficient, quick response supply options,” Williams said.

“This gap has been partly due to under-investment in mineral sands exploration over an extended period.”

Williams noted that new titanium-zircon mines needed long timeframes of about seven years to enter production.

“These style of mines require significant expertise to execute and that has added to the demand-supply tension.”

He pointed to China’s rapid emergence in the market as a prominent player from an almost nil position, as titanium feedstock and zircon prices moved to record highs.

“Certainly, the pricing power has shifted in this period away from the major consumers to the mineral sands ore producers," Williams said.

“Contracts are shifting from long-term provisions to contracts of significantly shorter duration, with no upside pricing constraints and more frequent price negotiations – six monthly for titanium feedstocks and quarterly for zircon.”

The global titanium market is worth US$4.5 billion a year, and US$3.5 billion for zircon, with Australia the largest supplier with 21% market share in titanium and 41% of zircon supply.