Bloomberg News

Sierra Rutile to Double 2012 Prices on Pigment Demand From China

November 09, 2011

Nov. 9 (Bloomberg) -- Sierra Rutile Ltd., the mineral sands producer that’s posted annual losses since 2007, plans to more than double prices of rutile next year amid demand from China for the raw material used to make paint and ceramics.

“Even as China slows, consumption is still strong” and it’s driving prices higher, Chief Executive Officer John Sisay said today in an interview in Hong Kong. He plans to set prices for natural rutile in 2012 at $2,000 a metric ton, up from an average of $745 a ton this year.

Producers including Sierra Rutile are foregoing long-term pricing contracts to take advantage of mineral sands demand driven by growth in emerging markets. Sisay said the company is spending $180 million to more than triple output by 2014.

Rising prices for titanium feedstock, made from mineral sands, “reflect ongoing, permanent closures in capacity since 2007” and the shortage could become acute in the next three to five years, Sydney-based analysts Glyn Lawcock and Tom Price of UBS AG said in a Sept. 30 report. “Global titanium oxide demand is closely correlated to a particular region’s economic condition and its GDP growth rates,” according to the report.

“The way prices were going before, it was difficult to see anyone investing in new mines,” Sisay said. London-listed Sierra Rutile charged an average $540 per ton of rutile last year when its cash cost was about $600 a ton, according to Sisay.

Capacity Expansion

Sierra Rutile, based in Freetown, Sierra Leone, and listed in London, produced 68,198 tons of rutile in 2010, a 6.8 percent increase from 2009. Expansions will take capacity to 200,000 tons a year by 2014, Sisay said.

The shares fell 0.8 percent to 29.88 pence when they last traded on Nov. 7.

The global pigment market will remain “tight” as major producers are already operating near full capacity, according to presentation slides on the website of Tronox Inc., a pigment producer that is securing supplies by combining the mineral sands business with South African miner Exxaro Resources Ltd.

Iluka Resources Ltd., the world’s biggest zircon producer, said Oct. 12 it expected to get a 10 percent price increase for the mineral used as glazing for ceramics in the fourth quarter.

--Editors: John Chacko, Ryan Woo

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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