Iluka Resources, Kenmare’s Australian listed peer, released its FY 2013 results earlier today and later held an analyst conference call. As part of the results release, it commented on the state of the mineral sands markets. The comments indicate an improvement in volumes in FY 2013 and that downstream inventories may have normalised. As a result, it suggests that the market may have bottomed and should see signs of improvement.
On zircon, there was an improvement in Chinese and North American volumes in 2013 vs 2012. However, Europe remains weak. Q1 so far has been quiet mainly due to the Chinese new year and the severe Northern hemisphere winter. Iluka is bullish on long term demand dynamics as its own customer survey suggested that demand intensity especially in China and other emerging markets is likely to increase rather than decrease. On TiO2, it confirmed current market commentary that that downstream inventories may have bottomed and capacity utilisation is likely to go up. However, producers still show a preference for cheaper lower grade feedstock rather than Iluka’s synthetic rutile and rutile. This is positive for Kenmare as it produces lower grade ilmenite.
The commentary is in line with our forecast for Kenmare. Reported volumes have been higher this year. However, this has yet to translate into mineral sands prices. There are signs that the market may have bottomed and that we should expect mineral sands prices to recover later this year, but that may perhaps be later than current market commentary may suggest.
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