Persistent tight supply is expected to support prices for zircon and zirconium products over the long term, with capacity from planned new mining projects insufficient to meet growing demand.
Prices for zirconium oxychloride were assessed up by 10pc on 28 September, with 35pc grade material moving up to a range of $3,200-3,330/t on a fob China basis from $2,900-3,030/t in the previous assessment on 21 September and $2,750-2,850/t a month ago. Prices have been rising steadily since January, when the market bottomed out at $1,780-1,860/t after a two-year decline, and have reached their highest in more than nine years.
The price range for 99.4pc grade zirconium sponge jumped by 33pc to Yn200-220/kg ($30.96-34.05/kg) ex-works China, having risen over the summer from $130-140/kg in late May.
Supply of zircon sand has tightened as producers initially cut output at the start of the pandemic with prices at two-year lows, as they expected lower consumption. But demand rebounded faster than anticipated and is projected to rise in the coming years.
Demand for zirconium from the ceramics industry rebounded globally in 2020 and into 2021, with home renovations increasing during lockdowns. That was exacerbated by low inventories, particularly in China, as consumers avoided holding stocks while prices were falling.
Over the long term, the shift towards decarbonisation is expected to continue lifting demand. Zirconium compounds are used in catalytic converters, for which demand is rising as the automotive industry increases their use to cut carbon emissions. Yttria stabilised zirconia (YSZ) is increasingly in demand for the electrolyte material used in solid oxide fuel cells. Fused zirconia is used in electric vehicles, solar cells and semiconductors. And zirconium alloys are used in nuclear reactors, which are increasingly popular in the fast-growing economies of Asia-Pacific, where electricity demand is rising rapidly.
Rio Tinto halted its Richards Bay Minerals operation in South Africa in June, declaring force majeure in response to ongoing unrest. It closed one of four furnaces at the plant, citing a lack of feedstock. It started resuming operations in late August, but the force majeure remained in place.
The suspension, with the rise in demand from China and the rest of the world, prompted Australia-based zircon producer PYX Resources to raise its price for premium zircon for the fourth time this year. The increase, from mid-September, lifted the price to $2,305/t. That was up by $555/t from the previous price and $910/t since the start of the year. PYX previously raised the price in March, May and June.
PYX said its premium zircon mined in Indonesia — with its low aluminium, uranium and thorium content — is in demand for creating fused zirconia and other high-tech products that cannot use standard zircon.
The company increased production by 25pc year on year in January-June to 3,501t. In February, PYX announced its acquisition of Tisma Development, which had operations in Indonesia, as well as plans to increase capacity. PYX expects a 100,000 t/yr deficit in zircon supply in 2021-24.
Meanwhile, Australian mineral sands developer Base Resources has scaled up its Toliara project in Madagascar by 25pc. Base said this week it expects to produce 1.03mn t/yr of ilmenite, rutile and zircon, up from its previous target of 839,000 t/yr.
The company expects the mine's annual zircon production to average 66,000t, up from 53,000 t/yr previously. It expects production to average 56,000 t/yr between the second and fifth years of operation, 82,000 t/yr in years 6-15, then 60,000 t/yr over the rest of its 38-year mine life.
Base sees a zircon market deficit from 2022 to 2025, when new greenfield supply is due to come online. But it expects brownfield and merchant supply to fall because of declining ore grades, putting the market back into a deficit of at least 100,000 t/yr from 2028. After dipping towards 1mn t in 2020, demand is expected to trend higher for the rest of the decade, approaching 1.5mn t by 2030.
"Significant new supply is needed… to meet projected zircon demand," the company said. "There is limited opportunity of ‘swing' supply from concentrates to manage this in the medium term."
Base expects prices to hold at higher levels for the rest of the decade in line with continued supply tightness. It sees zircon averaging $1,628 fob in 2025-30, $1,573 in 2031-2034 and $1,496 from 2035.
