13 September 2022

Zircon Market Dynamics

Gavin Diener
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ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 2

September 2019 in Dubai at the ZIA Conference

▲ High degree of uncertainty prevailing highlighted by the range of demand forecasts presented.

▲ The strong zircon market of 2017 and 2018 weakened into 2019.

▲ In 2019, worsening economic outlook and political instability (trade issues).

▲ Producers built inventory, downstream buying was conversative and hence downstream inventory reduced.

▲ Record Indonesian production in 2019, YoY weak sand trade data YTD Q3 for 2019 compared to strong concentrate trade.

▲ Zircon prices had flattened in H1 2019 and started declining in Q3.

▲ Slowing purchasing behaviour as a result of the uncertainty and the change in direction of pricing.

▲ The outlook for ceramics in China was weaker, Europe looked weak and Indian imports whiplashed.

▲ 2019 trade data shows 795,000 tonnes of sand (lowest since 2012) and 678,000 tonnes of concentrate (the highest ever recorded 2018)

▲ Prices in Q4 were US$50/t FOB lower than H1.

▲ Market continued to decline through to end of 2019, with demand down 4.5% for the year.

▲ There were hopes that 2020 would be a recovery year.

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 3

COVID in 2020

▲ Then came COVID – Nobody knew what to expect!

▲ Reduced zircon production and in some cases upstream activity.

1,100
▲ Downstream factory closures.
TZMI 2020 Demand forecast
▲ Trade stats for Q1 2020 showed a QoQ decline of >60,000 1,050
tonnes.

▲ Producers built inventory of zircon sand and HMC.

1,000
▲ Direct impacts on demand as well as logistics issues.

▲ Demand surprise in 2020 Q3 but industry not sure if sustainable. 950

End users had to run down inventory levels further due to
extended delivery timeframe due to disrupted logistic chains.
900
▲ TZMI’s 2020 zircon demand forecast evolved through the year as April July October December Current
more details emerged.

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 4

Supply and logistics driven 2021

▲ Producers’ 2021 sales were ahead of production drawing down inventory.

▲ Logistics challenges drove additional purchasing by consumers.

▲ Prices responded.

▲ Producers were fully sold within logistics constraints.

▲ Some producers moved to quarterly pricing.

▲ Spot prices reflected difficulty of securing delivered supply.

▲ Low inflation environment and steady demand supported pricing changes.

▲ Underlying supply factors – Logistics, RBM force majeure, Kalimantan flooding etc constraining supply.

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 5

 Zircon sand trade history
tonnes US$/tonne
300,000 2,000
Weighted average price
Import volume

1,500
200,000

1,000

100,000

© TZMI - NOT FOR REPRODUCTION 500

0 0
18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3 20Q4 21Q1 21Q2 21Q3 21Q4 22Q1 22Q2

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 6

Zircon concentrate trade history
tonnes US$/tonne
300,000 800
Weighted average price
Import volume

600
200,000

400

100,000

© TZMI - NOT FOR REPRODUCTION 200

0 0
18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3 20Q4 21Q1 21Q2 21Q3 21Q4 22Q1 22Q2

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 7

Progress on new supply projects

TZMI 2019 May ZSD new projects compared to May 2022:

▲ Total potential annual tonnes on list has increased from 1.1mtpa.

13%
▲ The number of projects has increased from 29 to 35. 23%

▲ Only four of the projects on the TZMI May 2019 list of new projects have
entered production or are close to being commissioned.

▲ These projects are predominantly in Australia.

64%

In production
Delayed
On hold

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 8

New supply project outlook
▲ Projects have encountered social and political instability as well as delays
resulting from COVID.
13% ▲ TZMI is currently tracking close to forty projects.

▲ The majority are in Australia followed by Africa.

▲ History shows that new supply arrives later than expected by project
developers.
28%
60% ▲ Hurdles include technical challenges, unfavourable economics, political
risks, environmental concerns, significant social impacts on communities
and time (COVID, logistics, resourcing, Russia-Ukraine conflict).

▲ New sources of concentrate supply are more difficult to forecast and can
be brought into production faster.
Australia
Africa
RoW

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 9

Forecast zircon supply
Forecast global zircon supply by key region: 2017 – 2022

‘000 tonnes
1,350
-0.8% RoW
1,200 Rest of Africa
1,050 China
South Africa
900
Australia
750

600

450

300
© TZMI - NOT FOR REPRODUCTION
150

0
2017 2018 2019 2020 2021 2022f

▲ Moderate 1% production decrease forecast for 2022.

▲ South Africa supply recovery, Australia down, China steady.

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 10

Zircon demand by region
Demand for zircon by region: 2017 – 2022

‘000 tonnes
1,500

-9.1%
Middle East & Africa
1,000 South America
India
Other Asia-Pacific
North America
500
Europe
China

© TZMI - NOT FOR REPRODUCTION

0
2017 2018 2019 2020 2021 2022f

▲ China to continue position as major consumer but with changes in end-use proportions.

▲ Growth potential from India and the Middle East.

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 11

Factors likely to affect the market

▲ TZMI expects demand to moderate over the remainder of 2022 and in 2023.

▲ Currently, producers can only sell what they produce – minimal inventory on hand.

▲ Increasing HMC supply to China.

▲ A market deficit is still expected, TZMI forecast being revised in September.

▲ Uncertainty - Inflation, rising interest rates, climate (floods and droughts), energy prices and political instability.

▲ Some new supply sources from 2024 but more significant in 2025 and 2026 depending on project delivery schedules.

▲ Producers expected to slowly rebuild inventories from current very low base.

▲ China and Europe economic performance is key.

ZIA CONFERENCE 2022 | ZIRCON MARKET DYNAMICS 12

 END

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