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Buyers Brace for Higher Raw Material Prices in 2018


Post Date: 25 Oct 2017    Viewed: 886

Several consumers of refractory minerals gathered in Santiago told IM they are certain that “everything will appreciate” next year as shortage of materials will trigger higher contract prices.

Price increases are expected to be seen "in most refractory raw materials" next years, buyers attending the UniteCR 2017 conference in Chile told IM.

As the tightness affecting several industrial minerals markets on the back of reduced output in China continues to pressure prices upwards, several consumers have reported they are bracing for higher sourcing costs in 2018.

"Everything will appreciate in 2018," one Europe-based buyer of refractory minerals told IM. "We know that for certain."

Another buyer quipped: "Sellers have been mentioning it regularly over the last month or so: they are preparing us for it. We know it will happen."

Higher spot market prices, coupled with limited availability of material, has been seen since Q2 this year and remains a feature of the market as the industry enters Q4.

Prices of Chinese fused magnesia have reached new highs over the last couple of weeks, while European fused magnesia prices are at a decade-high.

Brown fused alumina and bauxite also surged, following renewed anti-pollution inspections at operations in China and restrictions to mining with dynamite in several areas of the country.

The shortage in alumina is also bound to affect the supply chain of related products, including white-fused and calcined alumina materials.

Buyers are adamant they will see upticks in prices in their 2018 contracts for all of the above materials, as well as other inputs, such as andalusite.

Some manufacturers of speciality cements are expected to be affected as well, particularly as regards bauxite (which they source as refractory grades). While regular buyers tend to keep several months of feedstocks at hand in order to ensure smooth production, if the situation of tightness were to extend throughout 2018, they would also face increased sourcing costs.

A third consumer attending the Santiago event told IM: "When it comes down to it, it’s not really a question of 'if’, rather than 'when’ and, especially, 'how much’."

He said the expected widespread uptick in costs would force refractory makers to, in turn, seek to adjust their selling prices upwards to uphold margins, but this would be easier said than done.

At the same time, in the view of an eastern European refractory supplier, end users – particularly in the steel sector, which is the single largest end market for refractory products – have shoulders broad enough to absorb what would be a minimal increase in their costs.

"In steel, the cost of refractories is around 2% of the total – maybe not even that. If it has to go up half a percentage point, that in itself won’t be an issue for steelmakers," he said. 


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