Reductions in larger producers' zircon products supplies and destocking among Chinese buyers have created an opportunity for smaller suppliers to secure offtake agreements.
Australian producer Image Resources has secured an offtake agreement for its heavy mineral concentrate (HMC) containing high-grade zircon with Chinese customers Shantou Natfort Zirconium and Titanium and Guangdong Orient Zirconic Ind Sci & Tech. It last week completed a sale of 30,000t of HMC as its first shipment under the 100,000t agreement. It has scheduled a 20,000t shipment in August to a new buyer, and another 20,000t that will be shipped either as the second delivery under the agreement with Natfort and Guangdong Orient or as a sale to other customers.
Australia-based PYX Resources has also signed an offtake agreement with a Chinese buyer, for a two-year deal with zircon trading group Qingyuan Jinsheng ZR&TI Resources for 250 t/month of premium-grade material. Pricing under the agreement will be the prevailing US dollar market price for zircon, the company said. PYX is expanding its production capacity to 24,000 t/yr from 18,000 t/yr to meet increasing demand.
Outside China, Australian project developer Strandline Resources has signed an offtake agreement with Spanish ceramics and refractories producer Chilches Materials for 7,000 t/yr of premium finished zircon product for the first five years of output from the project. Strandline expects to produce 34,000 t/yr of premium zircon and 54,000 t/yr of zircon concentrate, supplying around 5pc of the global zircon market. As with PYX, the sale price will reference the prevailing US dollar market price for premium ceramic-grade zircon. The company has secured around 72pc of the forecast revenue from its production.
Global zircon demand is forecast to rise at a 2.7pc compound annual growth rate (CAGR) in 2019-23, PYX said, led by rising demand in China. Chinese demand accounts for around 47pc of global supply, but its domestic reserves account for just 0.7pc, with the bulk of production in Australia and South Africa. China's increasing need to import large volumes of zirconium and mineral sands is a key market driver. And global supply is forecast to fall by 3.6pc owing to the declining grades of known deposits and a lack of sufficient new production.
Chinese zircon demand weakened in late 2019 and the first half of 2020, as US-China trade tensions and disruptions to operations at zircon consumers owing to the Covid-19 pandemic reduced buying interest and exports of downstream products. Prices for Australian zircon sand fell at the start of the year, after rising steadily since 2018. But with Chinese consumers resuming operations from April, demand has started to rise and Chinese domestic zircon stocks are low, following destocking by the largest buyers, Image Resources said. International downstream consumers are also returning to production after lockdowns.
On the supply side, the largest producers cut output during the second quarter to balance supply or comply with coronavirus shutdowns. This is expected to keep prices stable for the rest of the year. "Current zircon prices are now at levels that may jeopardise or delay new project development," Image Resources said.
Argus spot prices for 66pc grade Australian zircon sand were last assessed at $1,470-1,490/t cif China, having fallen from $1,610-1,640/t cif since September when the market fell.
Australia-based mineral sands supplier Iluka produced 92,200t of zircon at its operations in Western Australia and Sierra Leone in January-June this year, down sharply from 159,900t a year earlier. The company adjusted production settings at its Narngulu mineral separation plant in Australia to reduce its zircon output "during this period of market uncertainty", it said. Iluka received an average of $1,265/t fob for its zircon products, including concentrate, in the first half of the year, down from $1,465/t fob a year earlier. Its average for premium and standard zircon fell to $1,354/t fob from $1,522/t fob.
African mineral sands producer Base Resources has revised down its guidance for zircon production to 23,000-27,000t in its 2021 financial year, from 31,657t in its 2020 financial year.
Base Resources sold zircon production for the June quarter and has secured contracts for all of its September production at prices consistent with the March quarter contracts. "Sales of zircon end products remain uncertain over the coming months, but adjustments to supply from major zircon producers are expected to provide some stability to market prices," the company said in its quarterly report.
