Chinese Zirconium supply is stalling, so how about an Australian alternative? - Alkane Resources Ltd
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Chinese Zirconium supply is stalling, so how about an Australian alternative?

Disruptions to the supply of Zirconium (Zr) materials from China look set to continue, due to stricter environmental standards being applied to production processes. This is good news for our environment, but as China supplies more than 75% of global Zr materials, it also brings problems for dependent industries and end-users around the world. Meanwhile, dwindling raw material (Zircon) supply also threatens the production of Zr materials. Australia has a unique, long-term Zr materials supply solution, but investment is needed immediately to address a looming global shortage.

Industries and products that depend on supply of Zr materials include:

  • mobile communications
  • clean energy technologies
  • catalytic converters used in the automotive industry
  • jet turbines
  • bioceramic dental, knee and hip implants, and
  • waterproof and fire resistant fabrics.

Learn more about the industrial applications of Zr here.

As China cleans up, supply of Zr materials dries up

In the past, lax environmental standards and enforcement allowed the Chinese Zr industry to undercut prices and drive Zr materials producers in Japan, Europe, the USA and elsewhere, out of business. Everyone has come to rely on China to supply Zr materials for the high-growth industries listed above.

Now, as more stringent environmental standards are applied to China’s industries, compliance costs are increasing and some plants will close rather than upgrade. China is likely to introduce stricter rules to reduce radioactive residues in waste streams from Zirconium Oxychloride (ZOC) production. ZOC is the key precursor for Zr materials, so while this a welcome step towards environmental sustainability, it’s also a threat to growing global industries that depend on Zr materials supply.

 Supply of Zr materials is also threatened by a shortage of Zircon

The major (94%) raw source material for the Zr materials industry is Zircon (Zirconium Silicate). The Chinese import almost all of the Zircon they process, mostly from Australia and South Africa.

Demand for Zr materials is increasing; therefore demand for Zircon is increasing – at around 3% compound annual growth. This year, an additional 30-40,000 tonnes of Zircon is needed. Growth like this requires at least one new mine to come online every year, but major Zircon producers such as Iluka, RBM, and Tronox have little or no capacity to increase supply in the near future.

While demand is rising, ore grades are falling, increasing production costs: as the ore grade drops, more ore must be processed to recover the same amount of Zircon. It costs even more to recover premium (purer) Zircon, and Zircon with desirably low radioactivity is in especially short supply.

As the price of Zircon rises, consumers find short-term solutions

Zircon prices rose by 40% in 2017. 2018 spot prices are significantly higher than contract prices, suggesting this trend will continue.

Consumers minimised their stocks when Zircon was relatively cheap and readily available, but have since reversed their strategy, buying more than they need now, in anticipation of higher prices in future. Zircon producers tend to allocate available Zircon according to past loyalties, so supply now depends on long-term relationships.

There is an alternative, long-term solution

The world-class Dubbo Project is a new and unique source of Zr materials, independent of Zircon supply and the Chinese industry, with a mine lifespan of 80+ years. Operated by Australian Strategic Materials, a subsidiary of Alkane Resources Ltd, the Dubbo Project will produce high-purity Zr materials to bespoke specifications, for use in a range of high-tech industries.

Mined and processed entirely within Australia, these Zr materials are derived from Eudialyte, not Zircon. Eudialyte is low in Uranium, so all Dubbo Project Zr products emit very low levels of natural radiation. With a sustainable supply chain, Australian Strategic Materials offers customers transparency, reliability, product value and shorter lead times.

To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here