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Zirconium oxychloride (ZOC) producers face tougher environmental standards in China, while materials costs are increasing worldwide, especially for zircon. Smaller producers are shutting down, the Chinese industry is consolidating, and ZOC prices are rising. In addition, many zircon mines are reaching the end of their life and supply chain stockpiles are dwindling, so the global forecast is for uncertain supply, growing demand and higher prices for zirconium materials. Significant additional supply from new sources like Alkane’s Dubbo Project is urgently needed.


  • There are 25 producers of zirconium oxychloride (ZOC) in China. 16 are in the eastern province of Shandong. National ZOC production is 346,000 tonnes annually.
  • The Chinese government is enacting a 5-year US$277 billion plan to address environmental concerns, especially industrial pollution.
  • Current means of ZOC production in China create pollutants including alkaline wastewater, acidic gas, and silicate sludge.
  • Recent changes to Chinese environmental regulations that are profoundly impacting the ZOC industry include 2014 air pollution standards and 2015 emission standards for the inorganic chemical industry. There are also provincial standards that can be stricter than the national standards.
  • The Chinese government aims to reduce China’s use of energy from coal to 58% by 2020, down from 64% in 2015. Shandong, one of the largest ZOC producing regions, is also the primary coal consumer.
  • Natural gas is the primary fuel-switching option for industrial boilers used in ZOC production. The government is seeking additional supply and building more pipelines to increase the use of energy from natural gas from 6% in 2013 to 10% by 2020.
  • Tightening regulations have their greatest impact on smaller ZOC producers who cannot afford to upgrade their emissions, disposal, storage and monitoring practices to comply. Some facilities will also need to pay for water treatment by an external party.
  • Producers who do not comply risk permanent closure. Some companies disregard closure orders by continuing to operate, but visits by environmental inspectors frequently force non-compliant operators to suspend production to avoid fines.
  • ZOC producers are also bearing the cost of converting coal-fired furnaces to natural gas, as well as paying more for electricity (energy from natural gas is 1.5 times more expensive than coal).

Environmental drivers alone have increased ZOC production costs by ~ 10%.

  • To date, environmental enforcement has focused on water and gas discharge, but China will need to address the issue of radioactive waste, particularly as future zircon supply is likely to contain a higher proportion of Uranium and Thorium. Producers will, therefore, bear additional costs associated with safer disposal/treatment of radioactive waste.

Materials costs are also rising

  • Average production cost for ZOC increased by 47% from mid-2016 to end-2017, mostly due to price increases for zircon – the raw material for ZOC production – and caustic soda, which is used in the extraction process.
  • As a result of environmental clamp-downs constraining local supply, domestic prices for caustic soda have risen by more than 100% since mid-2016.
  • Four consecutive price increases were announced by major zircon producers in 2017, with combined increases up to US$300 per tonne (~30%).
  • In first-half 2018, some zircon producers announced price increases of US$180-US$300 per tonne. Prices are expected to trend higher after one of the major producers announced a US$175 per tonne increase for second-half 2018.
  • The weighted average price for premium-grade zircon is estimated at around US$1,500 per tonne FOB for 2018, and at US$1,580 per tonne FOB for 2019.

Consequently, the price of ZOC is increasing.

  • Following several years of weak market conditions, with huge stockpiling in the supply chain and declining prices, ZOC prices recovered strongly in 2017.
  • The profit margin for ZOC producers is much greater than the margins of downstream users. Surveyed Chinese producers indicated that they could reduce their margin if prices become unacceptable to customers.
  • However, ZOC consumers have indicated that since there are currently no substitutes for ZOC, they will be forced to accept any price increases and pass the cost on to their customers.


Uncertain supply, growing demand

  • The Chinese ZOC industry is consolidating. Uncompetitive plants are closing, leaving large-scale companies, integrated producers with competitive downstream products, and companies with by-products.
  • In addition, a number of existing operations are expected to close due to end of mine life.
  • Global supply of zircon from existing operations is predicted to decline rapidly, down 4-5% per annum to 2025, to approximately 800,000 tonnes.
  • Global demand for zircon was 1.1-1.2 million tonnes in 2017 and is expected to rise beyond this in 2018. The ceramic sector is expected to underpin global zircon consumption growth in the future.


Significant additional supply from new projects will be needed to meet global supply deficit


(click the image below or here to download the full report)


  • Impact of tightening regulations on ZOC industry by TZ Minerals International Pty Ltd, Oct 2017
  • China ZOC Price Forecast by TZ Minerals International Pty Ltd, June 2018
  • Feedstock and Zircon Market Study by TZ Minerals International Pty Ltd, Feb 2018