Mineral sand miners have been warned to prepare for a price plunge as demand continues to slide.
In an investment note Goldman Sachs downgraded ratings for the mineral sands industry and warned the outlook remained challenging.
It said the long-term growth for both lithium feedstocks and zircon would be weaker than expected, with customers concentrating efforts to use mineral sands more efficiently, The Australian reported.
Goldman analysts cut next year’s zircon price forecast from $US1500 tonne to $US1200 a tonne and the forecast for rutile, used to make paints and plastics, also fell from $US1563 to $US1150.
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.
When supply started to break free of long-term contracts, prices increased up to 400 per cent above their historical level," Goldman said.
"The scale of the price increase and the implied risks to security of supply encouraged consumers to reduce consumption via thrifting and substitution. Spot prices have given up most of their gains, but efforts to reduce consumption of zircon and TiO2 across a broad range of applications continue."
An uplift in price is not expected until well into 2014.
Shares in Iluka, which accounts for around a third of global zircon supply, fell sharply following the announcement.
RBC Capital Markets moved the company from a "neutral" investment position to a 'sell", setting a target of $7.50, down from $9.87 previously.