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Why VMMP’s warehouses are overloaded with key products
Why VMMP’s warehouses are overloaded with key products

24.11.2016

Oleksiy Morokhovets, Sales Department Chief SE UMCC: why VMMP’s warehouses are overloaded with key products






























What is your assessment of the titanium products sales on global markets?
- Ilmenite market, ilmenite being our key product, is still congested. This is seriously affecting our company – SE UMCC's plants are not operating at their full capacity and there are stocks of unsold titanium concentrate at the warehouses.
The crisis is particularly evident in the segment of the so-called ‘metallic’ use of titanium – in the sphere of titanium sponge, slag, slab production. The traditional buyers of VMMP’s products were Russian and Kazakh processers – VSMPO AVISMA, Ust-Kamenogorskiy Titanium-Magnesium Plant and also Zaporizhzhya Titanium-Magnesium Plant (ZTMP).
Over the past several years, supplies to Russia plunged, as our buyer – AVISMA – confirmed. The combat actions in the East of Ukraine and broken trade relations between the two countries were among the key factors that contributed to the situation. The global raw materials crisis makes it impossible to quickly reorient to other markets. For this reason, our subsidiary VMMP is experiencing serious difficulties with ilmenite sales. As of November 1, nearly 104,000 t of ilmenite concentrate remained unsold.
Fortunately, other VMMP’s products – zirconium and rutile concentrates and also powdered concentrates – are in demand, though with the increase of production of these concentrates, the volumes of unsold ilmenite only increase.
What is the situation with sales at IMPP?
- At IMPP, the situation with sales has substantially improved in the third quarter of the year – Chinese consumers have expressed interest in Irshansk’s ilmenite. This allowed for unloading the company’s warehouses. As of November 1, only 16,000 t of ilmenite remained unsold at IMPP. We are very happy that after a decade of isolation from the global markets, Irshansk plant reinstated itself as an exporter (earlier, it provided raw materials to the former lease holder – Crimean Titan).
The plant’s economy stabilized, but the low prices for the products remain a pressing issue. The cost of export barely covers the production costs. There is no talk about the company’s development at the moment.
- Have the prices on the global markets seriously dropped in recent years?
- There was a substantial drop in global prices for ilmenite, rutile and zirconium in 2013, according to Iluka. Further downfall of prices continued up to 2015. This year can be viewed as the period of stabilization from the point of view of prices for titanium products. However, this is not the stability that allows to speak about investments. Specifically, in 2012, the prices for ilmenite concentrate ranged within US $400-500/t, depending on the market and terms of supply, while in 2015-2016, they dropped to US $100-200.  Zirconium prices literally plunged from 2012 till 2015: US $1,200 per tonne.
- What is the reason behind such a downfall?
The main reason is decreased demand for titanium raw materials in the world. This is a serious issue. The players do not seem to be in a hurry to reduce production volumes, as they fear to ‘drop out’ from the market. Our company is an exporter and therefore is also affected by this trend. Consumption of ilmenite ores remains practically two times lower than its output volumes. Naturally, this affects the price of the product.
- When can we expect a recovery of the raw materials markets, titanium in particular?
- In current conditions, the competitors are seriously pressuring each other in terms of pricing policy. Be that as it may, titanium ore processers actually increased purchase prices for the raw materials in 2016 in order to stimulate production. This so far has not let to substantial recovery of the market. Furthermore, the announcements of plans for launching new projects made by some mineral sands producers only aggravated the situation.
In the view of the above, the world’s top consulting agencies are quite modest in their forecasts of the market growth, both in terms of prices and output volumes. We are talking about a deep system crisis and the titanium segment is only a reflection of the global economic processes. We can expect the recover of our sector as soon as, for example, metallic ore market begins to recover. However, I do not think that it will happen before 2018.