Zircon and titanium dioxide may buck metals price...

Zircon and titanium dioxide may buck metals price downtrend
Goldman Sachs JB Were reckons zircon and TiO2 will command higher prices on supply concerns as other metals and mineral prices fall

Posted: Wednesday , 19 Nov 2008

SYDNEY (Reuters) -


Mineral commodities used to whiten ceramic dishes and make television screens are holding up despite the commodities sell-off, Goldman Sachs JBWere said on Wednesday, raising its price forecasts for zircon and titanium dioxide.

Goldman Sachs JBWere earlier this week issued its gloomiest commodities outlook yet as industrial activity in China and elsewhere slowed, forecasting copper prices to tumble 37 percent next year, iron ore 30 percent and steelmaking coals 43 percent.

But in a report on Wednesday it substantially lifted its price forecasts for zircon as well as modestly raising high grade titanium dioxide price forecasts.

"Despite the weak outlook for global commodities, zircon and high-grade titanium feedstocks are bucking the trend as supply concerns come to the fore," Goldman analyst Malcolm Southwood said in a report on the so-called minerals sands sector.

While everyone from African copper miners to Australian iron ore companies cut or halt output as the global financial crisis digs deeper into manufacturing, minerals sands suppliers are pushing for price rises over the next two years, the report said.

"Due to the industry's consolidated nature and the tight supply outlook, this puts the pricing power firmly in favour of the producers and they are now using it," Southwood said.

Beneficiaries of the higher prices will include Rio Tinto Ltd/Plc (RIO.AX) (RIO.L), Exxaro Resources (EXXJ.J), Iluka Ltd (ILU.AX) and DuPont (D.N), all of which are pushing customers to pay more, Southwood said.

Removal of more than 127,000 tonnes of zircon this year, out of a world market of 1.25 billion tonnes, was giving sellers a boost in negotiations underway over next year's prices, he said.

Zircon was already selling for as much as $900 a tonne for first-half 2009 delivery, which is $150 a tonne above the current price, he said.

"Security of supply is key to these consumers at a time when production is falling," Southwood said. "With no alternative supplies believed to be available even at these elevated prices, the risk to production is on the downside."

High-grade titanium dioxide feedstocks are in a similar, if not as acute, position to zircon, Southwood said.

Also, pinched supplies of rutile, brought about by production losses primarily in Sierra Leone and South Africa, are handing pricing power to the producers, he said.
($1=A$1.54) (Reporting by James Regan, Editing by Mark Bendeich)