“Difficult days ahead” for mineral sands

Mineral Sands miners have been warned to prepare for “difficult days ahead” as demand from China slows.

In an investment note yesterday Goldman Sachs downgraded ratings for the mineral sands sector and warned an oversupply of zircon could drive prices lower next year, The Australian reports.

Goldman analysts cut next year’s zircon price forecast from $US2,500 a tonne to $US1,500 and the forecast for rutile, used to make paints and plastics, also fell from $US2400 to $US1563.

Analysts said the zircon market had been a “victim of its own success” and waning demand from China would not recover until the second half of next year.

“Following a period of scarcity and high prices, ceramic tile manufacturers have learned to live with a lower amount of zircon per square metre,” they said.

“Based on industry sources, we believe that the process of substitution and demand destruction is structural, and the zircon market will be oversupplied for an extended period.”

Shares in Mineral Deposits and Alkane Resources have been hit by the downgrade, and shares in Iluka, which accounts for around a third of global zircon supply, also fell sharply.

Image: Fairfax Media

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