Magnesite ignites. by Mike O Driscoll, Editor

Transcription

1 Blast off: western magnesia producers embark on a spate of capacity increases to fill the gap left by declining Chinese supply. Pictured here, a quarry bench blast at RHI s magnesite mine at Breitenau, Austria. Courtesy RHI. Magnesite ignites A sea change in magnesia supply finds consumers substituting Chinese sources, while western players race to boost capacity as markets beckon by Mike O Driscoll, Editor he tide is has turned. As we T predicted in various editorials during 2006 and since, developments in China that have continued to unfold over the last four years or so have now reached a point where the supply market dynamics of certain industrial minerals have changed significantly. No more is this sea change better exemplified than by the supply market for magnesite, and in particular, its processed derivative grades of dead burned magnesia (DBM), caustic calcined magnesia (CCM), and fused magnesia (FM). But what has compounded the barrage of influencing factors impacting this sector, which include the widespread effects of energy and freight cost increases, has been rising demand from certain end use markets. Clearly, the magnesia market is experiencing bittersweet conditions. But those producers which have monitored and responded to this market transformation, stand to taste success in the near and medium future. This article highlights the key aspects affecting the magnesia supply market, the extraordinary spate of production capacity developments outside China, and market demand trends. State of supply In a nutshell, while China, as host to a wealth of magnesite resources in Liaoning province, remains a huge producer of magnesia, its supply dominance on the global magnesia market has been considerably weakened. In future, it will mainly aim to supply domestic, and to some extent east Asian markets. Magnesia consumers outside China are now scrabbling for alternative, western sources of supply. At the same time, magnesia producers outside China that weathered the storm of low cost DBM and FM imports flooding their regional markets for the last 20 years (and many did not), are busy investing in production capacity increases to meet not just demand from falling Chinese supply, but also demand from end use markets which is picking up (see later). 28

2 Yan Chen, vice president, at ACC Resources told IM: This is a good opportunity for MgO producers outside of China to increase capacity or build new capacity. There will be a serious shortage of supply of MgO if China continues to limit its export to 1-1.2m. tpa. And it is not just a matter of expanding capacity of existing magnesia product lines. In the face of plentiful lower cost DBM and FM substitutes from China over the last couple of decades, many western magnesia producers started to switch their focus to the non-refractory markets (eg. environmental, specialities) which promised lucrative opportunities (and still do) and crucially, a lessening of sales revenue dependence on the DBM refractories market. Now we have the likes of Baymag, Bommag, and Kumas not only expanding capacities but seriously considering diversifying into...dbm and FM production. Perhaps DSP, having ceased its famous high purity DBM activity as recently as 2005, might even reconsider a return to the other side. But its not all DBM and FM. The CCM and specialities markets are also demanding a response, and so Baymag, DSP, Martin Marietta, Premier Chemicals, Qmag, MGR, and Magnifin are also stepping up to the market on the non-refractory side. Hagen Schultes, president and chief executive officer of Baymag Inc. said: Let s just say that things are in a bit of turmoil with regards to supply out of China, that prices are definitely rising, and that opportunities for western producers are improving. The majors are conducting huge expansion programmes, such as Qmag, Magnezit, and the new look Magnesita. Even smaller players such as Causmag and Dalmia are looking to increase production. In short, the western magnesia supply sector is witnessing a landmark event in capacity investment and market share penetration (see table for summary of capacity developments). Andreas Meier, chief executive officer, RHI AG told IM: I think the demand/supply situation will remain tight as long as the basic materials industry will continue to grow on a similar level to recent years. I think alternatives outside China will develop quickly in such a scenario filling the gap. I think we have just entered a new, interesting period in the magnesia business. M&A activity Another response of course has been a raft of mergers and acquisitions in order to secure resources and supply outside China. These have included private equity groups taking over Magnesita and Qmag; Imerys entering the FM business through UCM; Peñoles further consolidating the electrical grade FM market by acquiring Minco; Martin Marietta acquiring Morton Salt s Specialty Magnesia Group; Bomex entering the market through Calmag (now Bommag); and Magnezit s pursuit of Slovakian magnesia, with Slovmag aboard while currently wooing SMZ. Interestingly, RHI has gone the other way, and has invested in a state of the art joint venture operation at Dashiqiao, Liaoning, with which it aims to secure high quality feedstock for its Chinese refractory plants (see later). Naturally, there is now renewed interest from several parties in the idled 50,000 tpa DBM/10,000 CCM Jormag facility, Jordan, and the commercially undeveloped Zhargat project, Saudi Arabia. Elsewhere, there will no doubt be suitors for stakes in SMZ, in Slovakia, and Magnohrom, in Serbia, whose respective ownerships are on the block. The China factor The China factor has been key to magnesia s market change, and has significantly influenced prices (see charts) and availability of material to global markets. On the latest situation, Meier of RHI said: In light of the Olympic games and the smuggling affair in China, the situation has become rather hectic and unpredictable, as obviously there is a shortage in China due to energy supply constraints affecting local production. There is obviously a shortage in export licenses impacting the export volumes, and prices also for lower grade DBM and CCM. Alan Roughead, managing director, Qmag told IM: The current supply/demand balance for magnesia is extremely tight and will get tighter. Chinese prices have increased significantly over the last 4-5 years and in the last 6-12 months in particular Chinese magnesia export smuggling via the South Korean port of Kunsan, which emerged again this year en route to Rotterdam, has supposedly run its course, ie. this source has apparently been stopped by government authorities, but not without ramifications. Gary Hallum, vice president-technical director, CCPI Inc. said: The turmoil is incredible and the pricing beyond comprehension since smuggling has been eliminated. Another US industry source commented: There is word on the grapevine that the smuggling bust has done something to the animal feed market for MgO here in the USA. Prices have skyrocketed. Roughead at Qmag believes that the smuggling clampdown alone has been the biggest influence on shortages and prices of late. This [the government clampdown] has been extremely effective and it is estimated that it has taken about 700,000 tpa out of the market. This has driven up prices China 97 DBM price ($/tonne fob Europe ) China 98 EFM price ($/tonne fob Europe ) Source: Qmag 29

3 significantly. The main impact is on demand for export licences. said Roughead. In July, the Chinese magnesia export licence was reported at RMB1,400-1,500($ )/tonne and DBM90315 stood at $450/tonne. By August, reports indicated that the export license had pushed through RMB2000($292)/tonne or more, and DBM90 was over $500/tonne, and expected to rise above $600/tonne by December. The views of some traders are that export licences will run out by September/October 2008, and the government will not issue any additional licences for This could totally dislocate the market in the last quarter of We are receiving a very large level of enquiry from our non traditional customers. However, we cannot service this as we are fully sold. Roughead told IM. But it is not China alone that is forcing prices up. Chris Armstrong, general manager, industrial products at Premier Chemicals LLC told IM: Natural gas prices at record highs have forced surcharge situations on all calcined products. Export costs and delivery times are up due to tight container and ship space availability. Technical grade prices have increased as well due to these cost pressures. Mag sulphate prices are up due to the record high costs of sulphuric acid and rising magnesia costs. Elsewhere, sky rocketing fuel prices forced Japanese producer Ube Material Industries to make two price revisions this year amounting to a total price increase of more than 40%. Many Chinese magnesia plants have had to close or partially close owing to a lack of fuel, power, and raw magnesite feedstock. They have also been hindered by the restrictions on drill and blast mining imposed as a result of Olympic controls. Other factors include the quality deterioration of Chinese DBM and FM over the past two to three years, particularly with regard to 97% MgO DBM. Roughead of Qmag said: We believe this is due to a combination of limited investment in exploration, poor mine planning practices, high grading the deposits, pressures to reduce cost, and a greater focus on the domestic refractory/steel industry. The upshot is that the cessation of smuggling, restriction of export licences and export volumes, declining quality and reduced production, more focus on domestic market supply, will together translate to even tighter magnesia availability from China. However, despite these overwhelming issues, the longevity of this trend has been questioned. Yan, ACCR warned: The danger still exists that the Chinese MgO price may collapse in future, since today s price does not reflect the production costs in China whatsoever. The price is mainly dictated by government policies and the very short term supply-demand situation and speculations. There is no long term business relationship existing between Chinese producers and major users around the world. That said, it is clear that western producers and consumers are responding by reducing their reliance on Chinese supply, increasing their capacities, and/or securing supply for the future. As Marinko Bosnjak, managing director, Bommag Ltd (part of refractory group Bomex Holding, Serbia) said: At the end of 2009 we should be independent regarding supply of DBM and FM [from China]. A similar strategy should be the base for any serious producer of magnesia based refractory products. Capacity developments summary The following highlights some of the magnesia industry s production capacity developments, which are expected to come on stream in the near future. Americas Baymag Baymag Inc. of Calgary, Canada, from its coarse crystalline magnesite mine near Radium Hot Springs, British Columbia and plant at Exshaw, Alberta, supplies some 80,000 tpa of CCM to the main markets of North America. These include animal feed (40%), pulp (25%), water treatment (15%), general chemicals (10%), and refractory (10%). The Canadian company intends to double its 50,000 tpa CCM plant at Exshaw, Alberta by adding a second multiple hearth furnace at the existing site. Start up is anticipated for the autumn of Perhaps most significant for the supply market, and indicative of the current supply situation, is Baymag s leaning towards restarting its mothballed 14,000 tpa FM plant, also at Exshaw, and also anticipating getting involved in DBM production. Hagen Schultes, chairman of the board, president and chief executive officer of Baymag told IM: This [the 50,000 tpa CCM expansion] will also serve as a first step towards the potential production of high grade DBM which would be an excellent strategic fit considering that Baymag is a member of the Refratechnik Group, a world leader in refractory products and technology. Magnesita Brazil s leading magnesite producer has undergone considerable transformation, and has ambitious plans, following its acquisition in 2007 by private equity groups GP Investments Ltd (GPI, 47%) and Gávea (12.5%; see IM September 07, p.29; IM June 08, p.8). In April 2008, Japan s leading refractories producer, Krosaki Harima Corp., acquired a 3% stake. The new look company, after 68 years ownership by the Pentagna Guimares family, has been stripped down from 24 subsidiary companies to just 8, and is now called Magnesitas Refrátarios SA. During a presentation to analysts in Brazil earlier this year, Magnesita s president, Ronaldo Iabrudi, stated that it was the group s intention to triple DBM production capacity (currently 320,000 tpa) and double its refractories production (currently 590,000 tpa) by This was supported by comments made by Mauricio Lustosa de Castro, chief financial officer, during a webcast on 13 August 2008, describing the company as bullish on the sinter (DBM) market. For Magnesita, sinter represents just 10% of company sales. We have great opportunities for sinter as prices have been going up. said de Castro. In addition to magnesite and talc, Magnesita owns mines and reserves of chromite, dolomite, kyanite, refractory clays, and pyrophyllite in Brazil. At present, the company sources alumina and graphite requirements externally, but is considering starting a graphite mine based on its 36m. tonnes of measured reserves. The company reported a 14.5% net revenue increase in Q to $197m. driven by strong steel consumption in Brazil, and thus refractory demand, combined with growing demand for DBM worldwide. Sales during Q amounted to 363,192 tonnes, comprising 101,600 tonnes of refractories, 2,877 tonnes of DBM, and 258,715 tonnes of other products including chromite, talc, and CCM. Year-on-year figures show 135,109 tonnes of total sales, with 97,634 tonnes of refractories, 8,024 tonnes of DBM, and 29,451 tonnes of other products. 30

4 Martin Marietta Although the sole remaining DBM producer in USA, Martin Marietta Magnesia Specialties LLC has spent the last few years focusing on the CCM specialities markets and it seems set to continue on this course. In 2007, Martin Marietta completed a 25,000 tpa capacity expansion for magnesium hydroxide powder at its Manistee, Michigan plant. The expansion was to meet the growing demand for non-halogenated flame retardants with low toxicity and smoke generation. The MagShield magnesium hydroxide product line is claimed to compete favourably with alumina trihydrate on a cost performance basis. Continuing its growth into the speciality product markets, in February 2008, Martin Marietta purchased the assets of Morton Salt s Specialty Magnesia Group. Under a tolling agreement with Morton, the Elastomag, VersaMag and Marinco products will continue to be supplied by Morton until the production equipment can be installed in a new facility at Martin Marietta later this year. Martin Marietta s purchase included the Morton trademarks. Martin Marietta has begun selling its high surface area products under the Elastomag name. The ElastoMag plant will allow the company s Woodville Ohio magnesia plant to increase its production of MagChem 20SC transformer steel grades. Martin Marietta is also expanding its hydration system including brine wells, reactors, thickeners and filtration systems to increase the overall capacity of its Manistee plant. Current capacity is 275,000 s.tpa CCM and Mg(OH) 2, although the degree of increase through this latest planned expansion was not disclosed. The expansion is targeted for completion by the end of first quarter Mark Wajer, vice president of business and technology, Martin Marietta, explained: The additional volume of the intermediate magnesium hydroxide product can then be processed to make FloMag, CellGuard or UtiliMag slurry products, MagShield powder, or calcined to produce MagChem lightburn, hardburn, or deadburn MgO products as well as the specialty grades including Elastomag, depending on the market demand for each product. Premier Chemicals The USA s other magnesia producer, Premier Chemicals LLC, is also concentrating on the magnesia specialities markets. Recently, its magnesite-brucite mine and plant in Gabbs, Nevada, producing CCM and Mg(OH) 2 slurry, expanded with the start up of its third Herreshoff furnace. Recent acquisitions have included a grinding facility at Aspers, Pennsylvania, and magnesium sulphate producer Giles Chemical Corp., with production facilities at Waynesville, North Carolina, Greendale, Indiana, and Rouses Point, New York. Richard N. Wrenn, Jr has become president and chief operating officer. Premier has five Mg(OH) 2 slurry tolling facilities in the USA and is exclusive distributor of Martin Marietta Magnesia Specialties MagChem light burn technical grades in North America. Quimica del Rey Through its wholly owned subsidiary Quimica del Rey SA de CV, Industrias Peñoles (IP) of Mexico produces magnesium sulphate, CCM, DBM, and FM using feedstock sourced from spent sodium sulphate brine from its underground mine at Laguna del Rey and dolomite from its at La Esmeralda surface mine, both at Coahuila. Magnesia production for 2007 was slightly down on 2006, at 79,135 tonnes owing to torrential rains that diluted the brines and major maintenance required for the rotary kiln. The year also saw approval for IP s new $15m., 15,000 tpa of magnesium hydroxide flame retardant plant, which started up in early In an effort to lessen its dependence on DBM for refractories, IP has continued its diversification strategy, ie. increasing production volumes of specialities such as milled and classified magnesium oxides for ceramics and electric insulators. These grades were produced at its new plant in Ramos Arizpe, Coahuila which completed its first full year of operations in 2007 and generated a 12.3% increase in output of speciality grades. IP also developed a project to optimise the use of additives in the production of electrical grade magnesia, which in 2007 generated savings of $60,000. Indeed, IP plans to further increase its magnesia specialities capacity from 84,000 tpa to 110,000 tpa in two stages. The plan calls for an investment of $17m. and is scheduled to start up in In 2006, IP acquired the electrical grade FM business and assets of Minco Inc. and is now one of the western world s two electrical grade FM producers (the other being UCM of the UK, see IM June 06, p.6). In 2007, the company generated a 30% productivity improvement in FM production. The installation of a new fusion furnace in 2008 is expected to expand FM production by an additional 1,750 tpa valued at more than $2m. per annum. Asia Pacific Causmag Further to cessation of operations in May 2008 at Australian caustic calcined magnesia producer Causmag Ore Co. Pty Ltd, the company s facility in New South Wales is back on line. Causmag s gas supplies had been disrupted in mid-may owing to financing challenges owing to the negative impact of New South Wales persistent seven year drought on the agrimarket the company s main market outlet for CCM (see IM July 08, p.13). Surendra Jhunjhunwala, chairman and managing director of Causmag, told IM: With resumption of energy supplies, we restarted production at the mines on July 2 and at the factory on July 11. We infused cash into the operations from our own resources in India. Causmag operates Young Mining Pty Ltd exploiting the Thuddungra magnesite deposit near Young, New South Wales. A shaft and rotary kiln produces 18,000 tpa CCM at Young. We have a steady inflow of orders beside pending orders that are being fulfilled. We are witnessing an increase in prices for imported magnesia from China. These developments will help us improve our financial condition. We are still negotiating with financiers for funding for working capital as well as capital investment to increase production at the mines and factory. said Jhunjhunwala. Moreover, rains have come to New South Wales which have somewhat alleviated the dry conditions for farmers. While the drought has not completely disappeared, Jhunjhunwala said that conditions overall were much better, and the company can now look forward to a better year ahead. Liaoning RHI Jinding As the global market leader in the refractory industry, as well as a significant captive producer of magnesia in Austria and Turkey, RHI AG, based in Vienna, decided that investment into a high quality magnesia production facility was a priority in order to secure long term supply of the highest quality refractories for its customers. 33

5 After careful analysis, RHI decided to invest in Dashiqiao, China, Liaoning province, a region renowned for its 2,600m. tonne magnesite reserves, accounting for 20% of global magnesite deposits. RHI has formed a j-v with Liaoning Jinding Magnesite Group Co. Ltd., (JDMG), of Dashiqiao, which operates one of the largest magnesite mines in Liaoning (the Huaziyu mine). RHI is to invest more than $50m. in a raw ore beneficiation and magnesia production plant to produce 100,000 tpa of the highest purity magnesia grades from middle grade raw magnesite. The j-v is called Liaoning RHI Jinding Magnesia Co. Ltd (see IM February 08, p.42 for full profile). Most of the highly pure magnesite will be calcined in a new multiple hearth furnace (MHF) possessing an inner diameter of 8 metres and comprising 18 hearths. It will be the largest furnace of this type in the magnesia industry worldwide. The final product, 98% MgO, is aimed principally at magnesia carbon refractory bricks for severe applications in the steel industry. A proportion of the calcined powder will undergo a special grinding process, followed by briquetting and sintering at approximately 2,100 ºC in a RCE 160 tpd shaft kiln. Using these conditions a final product density of more than 3.40 g/cm³ can be achieved. This high purity and high density sintered magnesia will then be used for special applications in the steel and cement industries. Magnesia capacity developments summary (outside China)* Company (parent) Plant location Existing capacity (tpa) Development (tpa) Americas Baymag (Refratechnik Holding GmbH, Germany) Exshaw, Alberta 50,000 CCM 14,000 FM mothballed New 50,000 CCM MHF, start up H2 2009; considering FM plant restart & high purity DBM production Magnesita Refrátarios SA (GPI, 47%; Gavea, 12.5%, others 40.5%) Martin Marietta Magnesia Specialties LLC (Martin Marietta Marietta Materials Inc.) Premier Chemicals LLC Quimica del Rey SA de CV (Industrias Peñoles) Asia Pacific Liaoning RHI Jinding Magnesia Co. Ltd (RHI, 80%: Jinding Magnesite Group Co. Ltd, 20%) Queensland Magnesia Pty Ltd (Resource Capital Funds) Europe/Middle East Bommag Ltd (formerly Calmag; Bomex Holding, Serbia) Brumado, Bahia, Brazil Contagem, Minas Gerais 320,000 DBM (150,000 >94% MgO; 180,000 >95% + >98% MgO) 60,000 CCM 34,000 FM Plans to triple DBM production by 2010 (and double refractories production, currently 590,000 tpa). Manistee, Michigan, USA 275,000 tpa CCM, DBM, + Mg(OH) 2 Hydration system capacity expansion planned to come on stream early 2009 Gabbs, Nevada, USA Port St. Joe, Florida, USA Coahuila, Mexico 150,000 CCM + Mg(OH) 2 Gabbs CCM plant recently started up 3 rd 75,000 tpa Mg(OH) 2 Herreshoff furnace 84,000 CCM + DBM 15,000 Mg(OH) 2 started early ,000 FM Dashiqiao, Liaoning, China under construction 100,000 tpa DBM Rockhampton, Queensland, Australia Tavsanli, Turkey 210,000 CCM,DBM,FM (120,000 DBM; 30,000 FM; 60,000 CCM capacities flexible) 12,000 rotary kiln 7,200 CCM shaft kiln 26,000 CCM expansion for early New 1,750 tpa FM fusion furnace in Additional 15,000 with debottlenecking by 2010; brownfield expansion to 325,000 total by end 2009, incl. 135,000 DBM, 30,000 FM, 160,000 CCM 35,000 DBM shaft kiln on stream spring 2009; assessing 7,500-15,000 FM plant Kumas-Kutahya Magnesite Works Corp. Kutahya, Turkey 180,000 DBM New DBM kiln; assessing FM production Magnesia Products SBU DSP (Israel Chemicals Ltd) Magnesitas de Rubian SA (Naviera Fierro SA; Promotora de Minas de Carbon SA; Inversione Terrales SA) Mishor Rotem, Israel 35,000 CCM, Mg(OH) 2, MgCO 3 35,000 expansion under construction, with debottlenecking; 2 nd Aman reactor for mid-2009 Monte Castelo, Lugo, Spain 75,000 CCM >83% MgO 5,000 CCM 60-65% MgO 40,000 MgCO 3 5,000 Mg(OH) 2 Magnezit Group Satka, Chelyabinsk ; Krasnoyarsk krai 800,000 periclase powders CCM, DBM, FM (20,000) new kiln under construction for 18,000 CCM >80% MgO of very fine particle size 150 tpd DBM shaft kiln at Satka recently commissioned; 2 x 300 tpd MHF for 2009; 95,000 CCM at Goluboye mostly earmarked for FM; aiming for 60,000 FM by 2010; most output for captive refractories use * ie. selected known or reported planned magnesia capacity developments to existing operations CCM caustic calcined magnesite; DBM dead burned magnesite; FM fused magnesite 35

6 Magnesia producers elsewhere (outside China) Company (parent) Plant location Capacity (tpa) Comments Almora Magnesite Ltd (Tata Refractories Ltd, 29%; Steel Authority of India, 20%) Haldwani, Almora, India 30,000 tpa 2007 output 2 shaft kilns Causmag Ore Co. Pty Ltd (Orind Australia Pty Ltd). Dalmia Magnesite Corp. (Dalmia Cement (Bharat) Ltd) Young, New South Wales, Australia Salem, Tamil Nadu, India 18,000 CCM 72,000 DBM slowly ramping up output within capacity operations restarted in July following power supply interruption in May; assessing expansion 50,000 monolithics, 10,000 bricks; assessing FM production using low grade raw magnesite Electro Furnace Products Ltd (UCM Group Ltd; ultimately Imerys SA) Hull, UK 18,000 FM mostly electrical grade FM Grecian Magnesite SA (Portolos Group) Chalkidiki, Greece >200,000 CCM,DBM 3 rotary kilns, 2 shaft kilns IBAR Ltda Brumado, Bahia, Brazil 6,000 DBM captive supply for refractories Iran Refractories Procurement & 40,000 DBM Sarbishe, South Khorasan, Iran Production Co. 25,000 CCM also sintered dolomite Konya Krom Magnesit AS Konya, Turkey 84,000 DBM captive supply for refractories Korea Magnesia Clinker Industry Group 100,000 DBM Dae Hung, Tanchon, Song Jin, in limited and interrupted supply to global 20,000 CCM Hangyong, North Korea market 5,000 FM Magnesit AS (RHI AG) Tutluca, Turkey 140,000 DBM supplies RHI European refractory plants Magnesitas Navarras SA (Magna Investments; ultimately Roullier Group; Grecian Magnesite SA) Magnifin Magnesiaprodukte GmbH & Co KG (Martinswerk GmbH; RHI AG) Zubiri, Navarra, Spain Breitenau, Austria 70,000 DBM 60,000 CCM 14,000 MgO 20,000 Mg(OH) 2 Magnohrom (seeking investors) Kraljevo, Serbia 40,000 DBM Muscle Shoals Minerals Inc. (UCM Group Ltd; ultimately Imerys SA) Nedmag Industries Mining & Manufacturing BV (Groupe Lhoist; NOM; Nedmag Ind. Mgt) 2 rotary kilns external serpentine feedstock; supplies chemicals, phamaceuticals, & refractories; Mg(OH) 2 to flame retardants; doubled capacity owing to flame retardant demand. 1 rotary kiln; not operating since late 2007; Global Steel Holdings Ltd (UAE) 2006 acquisition of Magnohrom terminated in early Cherokee, Alabama, USA 14,000 FM Electrical and refractory grades Veendam, the Netherlands 165,000 DBM 10,000 CCM 50,000 MgCl 2 flakes 50,000 MgCl 2 liquid (100% basis) 4,000 Mg(OH) 2 50,000 CaCl 2 prills, 25,000 CaCl 2 liquid (100% basis) intends to grow to meet high grade DBM demand in cement kilns POSREC Refractories Co. Ltd (POSCO) Pohang 40,000 DBM captive supply to POSCO Premier Periclase Ltd (CRH Plc) Drogheda, Co Louth, Republic of Ireland 85-90,000 DBM refractory grades RHI AG Breitenau, Hochfilzen, Radenthein, in Austria; Dashiqiao, China; Isthibe, South Africa; Marone, Italy 700,000 combined CCM, DBM, FM, sintered dolomite mostly captive supply to RHI refractory plants worldwide Sam Hwa Electrominerals Co. Ltd Pohang, South Korea 7,200 FM mostly to POSREC currently seeking investors, Magnezit has Slovenské Magnezitové Závody a.s. Jelsava Jelsava, Slovakia 375,000 DBM shown interest Slovmag a.s. Lubenik Lubenik, Slovakia 90,000 DBM mainly captive supply for refractories (Magnezit Group, Russia) Styromagnesit Steirische Magnesit 21,000 CCM output 2007 Oberdorf, Austria Industrie GmbH 71,500 MgCO 3 output ,000 DBM output Tamil Nadu Magnesite Ltd (state owned) Salem, Tamil Nadu, India 100 tpd rotary kin, 5 oil fired shaft ilns 20,000 CCM electrical, ceramic, & refractory grades; Tateho Chemical Industries Co. Ltd Ako, Hyogo 10,000 FM also produces high grade CCM, Mg(OH) 2 Ube Material Industries Ltd (Ube Industries Group) Ube, Yamaguchi, Japan 255,000 total; output = 120,000 DBM/ CCM; 140,000 Mg(OH)2 exports 30% DBM output to South Korea, Taiwan, and other Asian countries Vereeniging Refractories (Pty) Ltd Vereeniging, South Africa 10,000 FM captive use for refractories CCM caustic calcined magnesite; DBM dead burned magnesite; FM fused magnesite 36

7 Qmag Queensland Magnesia Pty Ltd (Qmag) is certainly on the road to expanding its capacity. The company s production of around 500,000 tpa magnesite at Kunwarara is expected to grow to 700,000 tpa after its proposed expansion is commissioned. This figure represents the full capacity of the preconcentration plant, while the beneficiation plant has a capacity of 1m. tpa. Further minor investment and debottlenecking of the preconcentration plant will allow the additional capacity in the beneficiation plant to be reached if required. The nameplate capacity of the magnesia processing plant at Rockhampton is 175,000 tpa, but over the last five years Qmag has incrementally increased this. The plant s capacity now stands at 210,000 tpa, but Qmag expects further de-bottlenecking to take this to 225,000 tpa over the next two years. During the 2007/08 financial year Qmag produced 205,000 tonnes, split: 100,000 tonnes DBM, 30,000 tonnes FM, and 75,000 tonnes CCM. Alan Roughead, managing director at Qmag explained to IM: The nominal capacity of DBM is 120,000 tpa, growing to 135,000 tpa with de-bottlenecking, but we have the complete flexibility to switch production between all three grades depending on market opportunities and relative margins. EFM is at full capacity at 30,000 tpa while theoretically we could divert all DBM and EFM production to produce over 200,000 tpa CCM. Qmag announced its brownfield expansion in March (see IM April 08, p.6). This will increase CCM production by 100,000 tpa from the end of Total combined capacity will grow to 325,000 tpa with nominal capacities of 135,000 tpa DBM, 30,000 FM, and 160,000 tpa CCM. However, if required, we can switch further production out of DBM and EFM into CCM depending on market conditions and margins. said Roughead. Europe/Middle East Bommag In Turkey, Bommag Ltd, formerly called Calmag, producing only CCM, was formed in March 2008 after being acquired by Bomex Holding of Serbia from Styromagnesit Steirische Magnesit Industrie GmbH, Austria. Bomex s strategy is to develop the magnesite business in Turkey to meet the raw material demand of its sister-company Bomex Refractory, of Pehcevo, Macedonia. Bomex has stated that the company is not a producer of CCM any more, and that reconstruction of the plant, investment in new equipment, consolidation of mines, and geological explorations has commenced. Although Bommag has a 12,000 tpa rotary kiln (which started in April) and a 7,200 tpa CCM shaft kiln, Bommag is now looking forward to starting DBM and perhaps FM production. A new 35,000 tpa shaft kiln, ordered from Maerz, is expected to start operating in spring 2009 and the next step could be establishment of a 7,500-15,000 tpa FM facility. DSP The Industrial Magnesia Products Division of Israel Chemicals Ltd, apparently still referred to as Dead Sea Periclase (DSP), sources Mg-rich brines from the Dead Sea and produces speciality grades of magnesium oxide, magnesium hydroxide, and magnesium carbonate at its plant located at Mishor Rotem. Raw Magnesite MgCO 3 Caustic Calcined, Dead Burned and Fused Magnesite MgO Brucite Mg(OH) 2 Wollastonite A powerful tool! With creativity and experience, thousands of different shapes can be made out of the seven pieces of the tangram. As a specialist in magnesite we have over 100 years of experience and know all the combinations that will lead you to success. Make use of our creativity by purchasing other industrial minerals from our company, too. Together with our procurement know-how a mature warehousing and logistics strategy makes us a reliable partner. Powerful. Worldwide. Alsterufer Hamburg Tel. +49 (0) Fax +49 (0) Info@Lehvoss.de 37

8 Historically, a renown producer of high purity DBM, DSP started to steer away from DBM markets towards the speciality CCM markets from In late 2007, DSP announced that it was expanding capacity which will provide the company with a second Aman reactor by mid The basic capacity expansion was expected to be completed by mid-2008, and further debottlenecking expansions in other specialty production lines are scheduled for completion during Current production capacity is 35,000 tpa, although it is understood that DSP is producing at about 40,000 tpa. The expansion programme will double production capacity to 70,000 tpa. DSP is experiencing strong demand from a range of speciality markets. Kumas Leading Turkish DBM and refractories producer Kumas-Kutahya Magnesite Works Corp. is also looking to start FM production as well as expand its DBM capacity by adding another kiln, and increase refractories production. With investments and facility construction complete, Kumas was expecting to start FM test production in July. One of the main reasons for adding the fused magnesite plant is the increasing prices of raw materials from China. Bertan Beyaz, export & logistics specialist at Kumas told IM. Magnesitas de Rubian Exploiting 200,000 tpa magnesite from its Impensada underground mine, in Lugo, north-west Spain, Magnesitas de Rubian SA (MGR) has started construction of a new kiln to calcine very fine particle size material. Production capacity of this new facility will be around 18,000 tpa CCM grading >80% MgO. The new product will focus on applications in the environmental market. MGR already produces CCM grades comprising >83% MgO and between 60-65% MgO for agrimarkets, as well as magnesite for fertiliser, and magnesium hydroxide as a neutralising agent. Magnezit Group Russia s giant integrated magnesia and refractories group, Magnezit Group JSC, earlier this year acquired 99.6% of the shares of Slovmag a.s. Lubenik, Slovakia, and is also targeting Slovakia s other magnesia producer, Slovenské Magnezitové Závody a.s. Jelsava (SMZ). Although with refractory production facilities in Germany and China, the Slovmag buy marks Magnezit s first overseas magnesia raw material source. Magnezit s largest production unit, Kombinat Magnezit JSC, produces a wide range of magnesia products (800,000 tpa periclase powders) sourced from its combined 160m. tonne magnesite deposits near Satka, Chelyabinsk region and at the Razdolinsk settlement, Krasnoyarsk krai. Kombinat Magnezit has placed an order with Maerz for two of RCE s 300 tpd MS4 gas fired MHF each kiln comprising 19 hearths to be installed at its Krasnojarsk plant. The new plant is expected to be operative in During 2007, the group undertook a number of projects: acquiring the Razdolinsk periclase works; starting production of CCM; plans to increase FM capacity; and to start dense sintered periclase production. Kombinat Magnezit s 150 tpd DBM shaft kiln at Satka has now been commissioned successfully. These projects, and now with at least one, and possibly a second, Slovakian magnesite source secured, are likely aimed at reducing Magnezit s requirements for Chinese magnesia. Market trends While the Chinese situation might be somewhat of a frustrating driving force for the western magnesia market, the positive demand trends in some of magnesia s end markets must surely be a welcome sign, and another reason for capacity investment. Alan Roughead, at Qmag commented: All markets in all world regions are performing strongly. We have a five year sales plan which includes our expansion capacity and we are sticking to this plan. The tighter market conditions and strong demand has allowed us to sell our additional capacity much more quickly and at much higher prices than we had forecast in our feasibility study. In addition, we are not changing our existing customer and product mix greatly but are taking advantage in the form of higher prices. Key to Qmag s market prospects is the possession of flexibility in switching the magnesia product (ie. DBM,CCM, FM), customer, and geographical sales mix if required. Refractories The DBM market is driven by refractories performance, mainly in the steel market, but also for cement, glass, non-ferrous metallurgy and other applications. It has historically been the mainstay of the magnesia market, but in recent years not all producers have wanted to have their magnesia product eggs in the one DBM refractories basket. However, with steel markets buoyant, demand is up and this market will remain an important consumer for DBM. Global demand for refractory materials is expected to grow by 7-8% annually until 2012, shifting from developed to developing countries. Growth is anticipated by further expansion of steel and cement output, primarily from new capacity in Brazil, India, Russia, and China. Walter Hammerer, raw material purchasing manager at RHI AG, told IM: RHI s consumption has increased, and is approximately 1m. tpa. Specific magnesia consumption in both steel and cement industry has remained constant. A broad range of MgO is used, 90%- 99% MgO. DBM and FM is sourced on a global basis (FM mainly from China). About 50% of RHI s magnesia demand is covered by its own MgO sources. DBM is used for bricks and monolithics in steel, cement, glass, lime, non ferrous metallurgy industry; FM mainly for mag-carbon bricks in steel production. On the customer side, we see a change to the past as a secured supply chain with high quality refractories is of greater importance than the price, definitely favouring companies like RHI which are to a significant degree vertically integrated and able to provide this security. commented Andreas Meier, CEO of RHI AG. Dutch producer Nedmag reports that refractory demand has grown steadily through increasing steel and cement consumption worldwide. As a consequence, Nedmag s sales of DBM (nedmag 99) in mag-spinel bricks have increased from 60,000 tonnes in 1993, to 145,000 tonnes in Together with its 39

9 sales to mag-carbon bricks, Nedmag has annual sales of 165,000 tonnes DBM. The company has identified that demand for high grade magnesia is increasing because of the increasing usage of alternative fuels in cement rotary kilns. On specific grades, owing to price increases it has been reported that steelmakers have stopped using DBM90 as a slag conditioning material in the USA, and there is a reduction in DBM95 consumption. However, DBM97 is enjoying an increase in demand from major refractory producers worldwide, and is expected to increase further in the future. Bertain Beyaz, export and logistics manager, Kumas in Turkey told IM: The demand for magnesia is very high at the moment and prices are increasing rapidly, booming production of steel and cement are the main reasons. Another reason is that consumers are looking for alternative sources of magnesia other than China. Iran s leading refractories manufacturer, Azar Refractories Co., consumes around 20,000-25,000 tpa of magnesia. Sources include China (97% MgO DBM; 99% MgO FM), Turkey (92%, 96% DBM), and Iran (92%, 94%, 96%, 97% DBM). Bijan Doroushi, export director at Azar Refractories said: Owing to expansion projects of iron and steel and also cement plants in Iran, the consumption of magnesia based refractories is growing. That is why the demand for magnesite raw materials for refractory manufacturers is increasing. India s refractories industry is experiencing a range of challenges. Demand is promising with India s cement and steel industries growing at around 10% per annum, but DBM supply from China and from domestic sources is short (see IM July 08, p.40). Jai Dalmia, president, Dalmia Magnesite Corp. told IM: The current state of dead burned magnesite supply [in India] particularly lower grades up to 92% MgO is very tight. Prices are adjusted fortnightly depending upon the oil price charged to us by government. oil companies. At present, all price adjustments are readily accepted in the market. Dalmia has recently completed development and field trials of magnesia tundish spray mix in steel plants and magnesia spinel bricks in its own cement plant. These two products have very good Brazilian steel production (m. tpa) 26,7 29,6 CAGR : 4.0% 31,1 32,9 31,6 30,9 33,8 Brazilian cement production (m. tpa) 39.4 CAGR : 2.8% future potential in terms of volume and price since specific consumption of both in their respective industries is almost constant. said Dalmia. Russia s Ogneupor Komplekt Group uses DBM and FM from China for the manufacture of gunning mixes (for tundish) and concretes (for steel ladles see IM June 07, p.102 for profile). The group has witnessed increased demand for its refractories and thus rising demand for its refractory magnesia requirements. However, like many refractory producers, it is assessing its options on magnesia raw material. Spitsin Andrey, head of development and management division explained: Observations we made within the first half of 2008, unfortunately, confirmed our apprehensions: the quality of magnesia coming form China is worse with every coming lot. So as not to be surprised in the future, we are now seriously considering the possibility to partly substitute Chinese magnesia to seawater material. CAGR E: 10.4% 37,6 41,5 46,2 CAGR E: 6.0% ,7 55,5 Annual growth* ThyssenKrupp: 4.5 mtpy (2009) V&M-Jeceaba: 1.0 mtpy (2009) ArcelorMittal Monlevade: 1.1 mtpy (2010) Usiminas: 4.0 mtpy (2011) CSN: 4.5 mtpy (2012) CVRD-Baosteel: 4.5 mtpy (2012) CVRD-Dongkuk: 2.4 mtpy (2012) *Expansion projects announced by Magnesita s customers. Source: WorldSteel, Magnesita (2008) Annual growth* Votorantim (SC, RN, TO): mtpy each Holcim (PR): 1.0 mtpy SOEICOM (MG): 2.0 mtpy Brennand (MG): 1.0 mtpy João Santos (BA): 1.0 mtpy *Expansion projects announced by Magnesita s customers. Source: SNIC, Magnesita (2008) At the same time, Ogneupor Komplekt understands that seawater DBM grades carry a higher price tag than the natural DBM grades it has been sourcing from China, and it will have to consider how to accommodate this raw material price increase should it make this DBM source shift. Certainly, Magnesita in Brazil is looking forward to pursuing opportunities in the refractory DBM markets in the future, even though it consumes DBM for its own refractory production. Mauricio Lustosa de Castro, chief financial officer, Magnesita, during a webcast on 13 August said: It s something we will have to seriously evaluate due to growth in Brazil and also in the global market. We can work sinter in a more strategic way beyond fulfilling our own necessities. Magnesita holds a strong position in South America s refractories market, accounting for about 65% of the steel market. South American demand for refractory materials is expected to grow by 43

10 40-50% until 2012 (see charts for Brazilian steel and cement growth). Magnesita believes it is well positioned for the DBM market as a result of its strong relationships with its client base in Brazil. Many of those Brazilian clients have operations in other countries such as ArcelorMittal, Gerdau Group, and Techint Group (Ternium and Tenaris). Magnesita sees the strongest potential for its growth in the international markets to come from the NAFTA area. A company spokesperson told IM: Magnesita is responding to these challenges by investing in its production capacity in Brumado and by strengthening partnerships with key customers for long term dependable DBM supplies. Non-refractory markets The non-refractory markets for magnesia have been seeing strong demand for some years now, in particular environmental and certain speciality markets, such as flame retardants. But there are also new growth areas emerging, such as in hydrometallurgy. Industrias Peñoles reported that although its 2007 magnesia production was down on the previous year, this was more than offset by higher prices driven by growth in demand for high value products in the global market, notably in the rubber industry and for the production of flame retardants for plastics (see IM February 08, p.53). From 2005 to 2007 Magnifin, in Austria, doubled its MgO and Mg(OH) 2 capacities to meet increasing demand for its flame retardant grades. DSP in Israel, likewise, is continuing to increase its speciality magnesia capacity, which includes supplying the food and pharmaceutical markets. During 2007, magnesium led the growth in the food supplement minerals category in the USA, with 13.1% growth on total sales. Magnesium sales seems to be benefiting from growing research showing that the mineral reduces both systolic and diastolic blood pressures, yet also represents one of the most common nutritional deficiencies for people who eat a Standard American Diet. The environmental market remains a good prospect for CCM. Ube Material Industries is developing magnesia based products for applications in algae removal, improving water quality and bottom sediment for rivers, lakes and marshes, and in soil stabilisation. Other developments by the Japanese producer includes special additives for electrical and electronics applications. Japan s total CCM market is about 700,000 tpa, of which Ube s share is 30%. For the domestic refractory market, Ube accounts for 25%, and for FGD, 50%. A company spokesperson told IM: Recently, our domestic share has been increasing due to the change of supply situation of dominant Chinese MgO, which has been unstable in price, quality, and quantity. Since the start of its magnesium chloride flake production in 1996, Nedmag s capacity for this product has expanded nearly every year. In 2007 the annual output exceeded to 50,000 tonnes which was used in a range of applications including: the production of flame retardants, textile finishing, feed additives, de-icers, and dust suppressants. Through the introduction of magnesium chloride pellets in 2008, Nedmag is aiming to expand its position in the de-icing and de-dusting market in the USA and Europe further. The Dutch producer also supplies CCM for cements, fertilisers, feed additives, and water treatment products; and Mg(OH) 2 for paper, fertilisers, acid neutralisation of waste streams. The use of magnesium hydroxide in flue gas desulphurisation and wastewater treatment is growing rapidly a company spokesperson told IM. The main target markets for Qmag s recent expansion plans are the hydrometallurgical markets (nickel/ cobalt and copper/cobalt processing) and agriculture. We have already signed long term contracts for 45% of the expanded capacity and expect the new capacity to be fully sold before end The CCM market is showing much stronger growth, current and future, showing equivalent, and in some cases better, margins than DBM and EFM. The capital requirements of a CCM expansion are much lower. said Alan Roughead, managing director of Qmag. New high pressure acid leach processing technology for Ni/Co and Cu/Co require CCM as a reagent in neutralisation/ precipitation. It seems that Qmag has certainly nailed this growth market (demand for the metals is booming), where the main application areas are the lateritic Ni and Cu/Co deposits in Australia, Indonesia, Philippines, Brazil, and the Congo (see IM April 08, p.7). Of course, CCM use in the agrimarkets (animal feed, fertiliser) remains a core market for magnesia. Chief influencing factors include the performance of organic raw materials in animal feed, such as wheat, corn, and soya. Faced with instability of the markets, such as the soaring cost of wheat, European animal feed production can be variable, and is further impacted by strong competition from countries exporting white meat, such as Brazilian poultry. CCM use in fertiliser also suffers from a fluctuating market. At present, worldwide demand for cereals and biomass production has driven up demand and prices for the fertilisers TSP and DAP. These products use the basic ingredients of phosphorus, potasssium, and nitrogen. Hervé Copsain, magnesium business unit manager, Timab, told IM: The cost of creating specific fertiliser formulae which include magnesia is too expensive compared to the profit return, to justify the consumption of massive quantities. Cospain considered that DBM was highly technical within a dynamic economic environment, whereas basic agricultural magnesia was a commodity that suffered from the instability of global markets. Cospain added: If the decline in the wheat market continues beyond the second quarter of 2008, this could also produce a negative impact on the demand for fertilisers, and magnesia as a side effect. However, Cospain underlined that the future of CCM depends on industrial markets and in the particular the refractory market. The challenge for producers of agricultural magnesia is on the actual identification and ability to develop new mining capacities in a more cost effective way, working jointly with DBM and FM producers for the obvious reasons of sharing costs and industrial expertise. said Cospain. Logistical concerns also need addressing, such as standardising bulk container loads and the beneficial use of polythene bags, as well as the 40 tonne PTC European (freight weight) legislation becoming less strict. 45