GROWING demand for mineral sands is allowing Iluka to secure much-needed price increases.
GROWING demand for mineral sands is allowing Iluka to secure much-needed price increases.
Prices for many of Iluka’s products have been falling for a number of years because of an oversupply.
Meanwhile, the revenues of most mineral sands companies, including Iluka, are being severely hampered by the weakening of currencies against the US dollar, according to Iluka CEO Mike Folwell.
Mr Folwell said every one-cent movement in the Australian/US dollar exchange rate had a $5 million dollar impact on Iluka’s profit, pre-hedging.
Earlier this year the Australian dollar rose from below 70 cents to almost 80 cents, and is heading that way again.
But while some commodity producers have been able to partly offset this with price increases resulting from increased demand, mineral sands producers have been less successful.
According to the WA Government’s heavy mineral sands price index, which is made up of ilmenite, upgraded ilmenite, rutile and zircon, the price for these products has fallen by about 20 per cent since the 2001-2002 financial year.
While prices for zircon have increased strongly over the past two to three years, prices for most titanium minerals, including ilmenite and rutile, have remained steady.
Iluka is one of the world’s leading producers of titanium minerals. It also produces about 40 per cent of the world supply of zircon, the price of which has increased largely on the back of strong demand from China.
Iluka is capitalising on this by planning to lift zircon production by 140,000 tonnes in the next two years.
It also recently secured a $US100 a tonne price increase to $US600/t in 2005, which to Iluka represents a 15-year high.
While prices for titanium minerals have been slower to react due to an oversupply, Mr Folwell suggests this may be correcting.
In Iluka’s half-yearly presentation it was suggested that demand across all sectors and regions was stronger.
Iluka said its titanium minerals were fully sold in 2004 and anticipated a similar outcome next year, with average revenues up by 10 per cent due to higher pigment sales and further price increases anticipated.
Increased demand in much smaller markets, including the growing aerospace industry and Japanese shipbuilding, was also anticipated.
Mr Folwell said Iluka’s titanium mineral products were in stronger demand from China.
He said Chinese demand, which was expected to continue, could be read two ways.
One was that China was an exporter of products that become substitutional in other markets.
“Therefore global demand for raw materials doesn’t necessarily rise, it just shifts from one region to another,” Mr Folwell said.
On the other hand, he pointed to China’s huge domestic market.
“Clearly as the Chinese popu-lation grows in wealth they tend to spend more money on more discre-tionary items like refrigerators and cars, all of which utilise our products.”
Titanium metals are mainly used in paint and the protective coatings industry, as well as in the production of titanium metal and in welding.
Zircon is used in the ceramic industry for glazes on tiles and the like. It is also used in TV screens.
ILUKA AT A GLANCE
• 1954: Westralian Oil Limited explores WA for hydrocarbons.
• 1955: Ilmenite found near Capel, processing starts 1959.
• 1968: Name changed to Westralian Sands Ltd.
• 1986: First synthetic rutile plant at Capel.
• 1998: Westralian Sands acquires RGC, with deposits in Australia and the US.
• 1999: Name changed to Iluka Resources.
• 2002: Iluka acquires Basin Minerals, with mineral sands assets in the Murray Basin.
• 2004: Opens Lulaton operations in Georgia, US. Iluka commits initial $A270 million to Murray Basin.
