Iluka Says Zircon Sales to Top Production on China Demand

Iluka Resources Ltd., the world’s biggest zircon producer, said sales will exceed production this year amid strong demand in China and North America, and on signs of a recovery in Europe’s ceramics sector.

The Perth-based producer, one of the 10 best performers this year on the S&P/ASX index of 52 resources companies, said sales of zircon, a mineral used to glaze ceramic tiles, rose 143 percent to 210,900 metric tons in the year to June 30, compared with the same period a year ago.

Iluka rose 4.7 percent to A$10.91 in Sydney trading to its highest since June 6. Austraila’s S&P/ASX 200 benchmark index fell 0.1 percent.

The producer, which raised its 2013 zircon production forecast to 280,000 tons from 220,000 tons, “continues to expect that zircon sales in 2013 will exceed production,” it said today in a statement.

The rise in zircon demand in China reflects a strong housing market and a preference in the country for large areas of tiled flooring in new dwellings, the company said. However, Iluka warned that cooling in growth in China could see demand weaken. Growth in China, the biggest zircon consumer, slowed for a second quarter to 7.5 percent in April-to-June, a June 15 National Bureau of Statistics report showed.

Ceramics Demand

An increase in demand in the European ceramics sector could also be fragile, the producer said.

“Iluka remains of the view that forecasting demand for both zircon and titanium dioxide remains challenging, due to factors such as the volatility of global and regional economic performance and associated business confidence levels,” the company said in its statement.

“The key challenge for Iluka is how to position the business for the growth in the Chinese market,” Citigroup Inc. analysts led by Clarke Williams said in a July 15 note.

Revenue from sales of mineral sands in the three months ended June 30 was A$241.8 million ($223 million) compared with A$466.5 million a year earlier, amid weaker global demand for rutile and synthetic rutile, the company said.

Sales of rutile fell 34 percent to 56,300 tons in the year to June 30 compared with the previous year, while sales of synthetic rutile slumped 80 percent to 20,000 tons over the same period. Iluka cut its forecast of total rutile and synthetic rutile sales in 2013 to 200,000 tons from 275,000 tons, it said.

Zircon prices stabilized in the six months to June 30 and had “increased slightly towards the end of the half,” Iluka said. CIMB Group Holdings Bhd. analysts led by Michael Evans forecast zircon at an average price of $1,263 per ton in 2013 in a note to clients dated May 27.

(Updates share price in third paragraph.)
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