iluka report

Iluka quarterly production report out. I'd sum it up, particularly in relation to the zircon market from our perspective, as positive but patchy.

Some very interesting comments about the market and demand in China and the USA. My inference is that they expect the market in China specifically to show more strength next year with inventories low and use steady. Possibly helped drive the offtake agreement MZI secured the other day.

Zircon commentary from the Iluka report follows verbatim:
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Zircon

Zircon demand overall recovered in 2013, but the recovery was uneven across geographical markets, end use
sectors, as well quarter to quarter and sales remain below the levels seen in 2010 and 2011.

China, as the major global zircon consumer, imported higher volumes in 2013 than in 2012 and 2011
(according to China import data) and, even allowing for uncertainties associated with inventories held by
producers and downstream customers in China, it appears that China’s underlying demand characteristics
were comparatively robust in 2013. This relatively solid demand was exhibited despite there being little
improvement, as yet, in the large Chinese zirconium chemicals industry.

A feature towards the end of the year was that zircon sand inventories held by customers in China were again
at low levels, with customers continuing to order on an “as required” basis and with some holding back from
buying activities as prices softened marginally. As the traditional low season has commenced (December to
Chinese New Year) muted buying activity is expected until February 2014.

North American demand, mainly influenced by industrial applications such as precision casting, as well as
ceramic tile and sanitary ware applications, aided by a recovery in the United States economy and housing
market, was generally stable in the second half. Working capital decisions by several US customers resulted in
the rescheduling of some ordering expected in the second half of 2013, but overall, as with China, North
American demand has been solid.

Zircon demand experienced by Iluka in other parts of the world, notably Europe and its ceramic exports
markets in the Middle East was weak, as it was in North Africa, Brazil, India, Japan and parts of South-East
Asia. Given the avoidance of worst case economic scenarios, European demand showed some tentative
signs of improvement in the second half, but it is expected that the recovery in both domestic and export led
demand in Europe will evolve only slowly over 2014.

Factors influencing demand in other markets varied. In India, for example, depreciation of the Rupee made
imports more expensive, while a protracted strike in a major ceramics producing province in the country in the
last quarter depressed demand in this important, emerging market.