Background Various grades of kaolin are produced to enable end-users to produce a specific level of performance in their products. Typically the major features a papermaker is seeking in order to keep his clients coming back and a pigment supplier can influence is:
1. Sheet of paper looks good (colour, brightness, smoothness, opacity)
2. Sheet of paper prints well (ink absorption and ink pigment holdout, low linting tendency, roughness)
To obtain these often-contradictory properties it is necessary to blend kaolins with other pigments like calcium carbonate, talc, titanium dioxide, satin white, etc.
Therefore performance in the sheet is the important criteria for kaolin although it can be difficult to introduce a product, which may have unusual pigment properties particularly if those properties are regarded as impacting on processing efficiencies. The growth in alkaline sizing and use of GCC & PCC including in-house and satellite plants may affect kaolin volumes in the years ahead.
Kaolin TypesKaolin is produced from ore-bodies with inherent and largely unalterable properties. The process plant seeks to manufacture grades of kaolin, which consumer expectations (table 1). Generally an ore-body will limit the range of products that can be economically produced. As a consequence, European consumers have a history of using coarse English clays whilst Asian consumers and US have been helped by a wide range of high brightness Georgian kaolin that can range from ultrafine particle size to coarser delaminated kaolins. The Asian market uses a simple classification system based on brightness and, to a lesser extent, particle size. The system was based originally on conventional water-washed grades of kaolin. Calcined kaolins and delaminated kaolins are viewed as specialty kaolins and filler kaolins are a separate segment altogether.
Table 1. Typical paper kaolin grades.
Grade Key Characteristics Comment Filler grades Brightness
Particle size distribution This is a low cost grade competing with carbonate and talc. The market is dominated by variable quality product from Indonesia. A high brightness, low cost kaolin with good brightness could appeal to Japanese papermills. Delaminated Brightness
Aspect ratio, surface area and to a lesser extent particle size distribution Delaminated kaolins not widely used in Asia currently, however, good growth prospects as this product is used in the fastest growing segment, lightly coated paper. Trend is to use No 2 grade kaolin. Brazilian producers have developed high brightness, low viscosity products in this sector and are making inroads. Calcined Brightness
Opacifying power Highest value clay due to high energy (calciner) required in production, low bulk and consequently high shipping costs. The market for calcined continues to grow as whiteness standards are driven ever higher by competitive pressures including use in newsprint grades. No 1 Coating Brightness
Particle size distribution
Viscosity High brightness is the key feature and is typically >90 %GE with recent developments raising limits to 91% GE. Particle size distribution can be quite fine (98%<2µm) to coarse (85%<2µm) although the mid range and fine grades are dominant. No 2 Coating Medium brightness
Particle size distribution
Viscosity The brightness range is 2-3 points below No 1 grades. The dominant grades are at the coarse end and the fine end. Some overlap with delaminated grades has occurred with the coarser grades.
Source: Stratum estimates
Indicative Prices by Kaolin TypePricing varies greatly depending on the country of sale (table 2). This is largely driven by several factors:
· Freight differences - The dominant US producers tend to seek a FOB price ex-plant and add costs including freight. This means that costs to Japanese ports are substantially below other ports in the region due to proximity relative to other Asian clients and the cargo size is generally larger. Currently US producers will be enjoying favourable returns from exports to the Asian market due to very low freight rates from the US.
· Agent commissions - Variations in agent commissions exist across countries. Competitive positioning. Occasionally there is an effort by various suppliers to extract market share from their competitors. An unrealistic price can exist for several years.
Table 2. Indicative prices for the various kaolin grades.
Grade Indicative pricesUS$/MT CIF Comment Filler grades 55-95 Many deposits in the region produce this grade e.g. Belitung & Banka Islands, off Indonesia. Also Malaysian deposits e.g. AKI. Freight costs are low although still a significant proportion of the total cost. Delaminated 220-230 Delaminated kaolin offers good value with brightness approaching No 1 kaolin (Brazilian grades are even higher). Use mainly restricted to light coated paper. Calcined 450-610 Relatively small market in Asia but growing quite quickly in a number of countries. Brightness ~ 93% GE and a higher brightness product with similar scattering coefficient would be very attractive to the paper industry.
Economics are attractive for a regional producer due to substantial freight cost savings. No 1 Coating 230-240 Alkaline sizing & increasing carbonate use has trended growth to fine particle size kaolin particularly outside Japan. A slightly coarser product holds the dominant market share. No 2 Coating 205-215 The dominant product in this sector is a coarse number 2 grade that is $5-10 cheaper than fine kaolin.
Source: Stratum estimates
Regional Tonnages by Kaolin TypeThe demand for coating kaolin continues to increase in conjunction with increases in economic wealth. The Asian recession saw a very large cut-back in investments in fast growing countries like Indonesia, however, the time lag between orders and installations has meant that a number of world scale machines have been started up in China, Japan, Indonesia and India and other countries. Production has been stable because of sales to European and US markets. As the Asian economy begins to grow again, investments will continue and growth in kaolin demand will accelerate from 2001. Most growth will occur outside Japan.
Table 3. Estimated Quantities
Grade Estimated Quantity t/yr 2001 Comment Filler grades 345,000 Many deposits in the region produce this grade e.g. Belitung & Banka Islands, off Indonesia. Also Malaysian deposits e.g. AKI. Freight costs are low, though still a significant proportion of the total cost. Delaminated 70,000 Delaminated kaolin offers good value with brightness approaching No 1 kaolin (Brazilin grades are even higher). Its use is restricted to light coated paper. Calcined 40,000 Relatively small market in Asia but growing quite quickly in a number of countries. Brightness is typically 93% GE (~ISO 91) and a higher brightness product with similar scattering coefficient would be very attractive to the paper industry. Economics are attractive for a regional producer due to substantial freight cost savings. No 1 Coating 550,000 Increasing carbonate (GCC &PCC) use has trended growth to fine particle size kaolin particularly outside Japan. A slightly coarser product holds the dominant market share. No 2 Coating 750,000 The dominant product in this sector is a coarse Number 2 that is $5-10 cheaper than fine kaolin.
Source: Stratum estimates
Country Consumption EstimationsThe dominant Japanese market is the key country for any aspiring kaolin producers wishing to sell into the region. Other countries in the region have a different papermaking philosophy due to European influences, however, the key characteristics of the region - unlike other regions - is to exploit raw material opportunities. This means that consumers will use the lowest cost pigment to produce their target quality even if the pigment is not the conventional choice. We see regular examples of this throughout Asia (table 4).
Table 4. Coating Kaolins by country
Country Estimated share of the region % Comments Aust/NZ 3% Significant consumer of calcined kaolin and coarse kaolin. However several key papermills have switched to alkaline sizing & use wet-GCC and normal GCC. Japan 64% Largest user in the region by virtue of its high level of readers and relative affluence, especially for glossy advertising material etc. Total usage is around million tonnes in papermaking alone. China 5-7% Growing rapidly with major JVs such as APP have set up several new mills. Tendency to rely on local kaolins from Fujian province, which is being developed as JV’s with various western companies. Major constraint is access to import licenses for non-western owned mills Sth Korea 14% Totally reliant on imported coating kaolin. Has been a very fast growing producer and companies are in JV across the region. Uses a high proportion of carbonate in the coating. Pyrophyllite remains widely used as filler. Production of some paper grades to JV in China. Local growth likely to be hampered by off-shore capital investments, as well as growing use of locally produced GCC. Taiwan 6% Reducing demand due to the movement of papermaking JV’s to China, due to resource availability and cost of production. Thailand 4% Major growth expected even though local timber resources are becoming less available due to over exploitation in recent years Indonesia 5% Good potential for imported grades as USA and Brazilian kaolin supplied into this market. Indonesia is likely to become the major regional paper producer over time. Several large mills dominate imports. Vietnam Minor Good potential as country GDP grows with USA barriers have now gone. Philippines Minor Lacks good kaolins but many mills reluctant to pay for quality imports. This may change as overall paper grade expectations improve with time. Malaysia Minor Have large reserves of suitable kaolins to match rather lower demand, but some opportunities for calcined and quality white grades. Bidor reserves have somewhat limited life and higher freight from Sarawak could increase import competitiveness from other suppliers. Newspaper increasing in importance.
Source: Stratum estimates
Estimated Growth Rates by Kaolin TypeMarket growth in the region has suffered significant shocks in recent years. This has encouraged the entry of major European paper producers into the region in joint ventures with regional producers. The installation of new papermaking capacity is expected to re-establish itself at high rates as new pulp mills continue to vertically integrate. The trend is expected to move towards lightly coated grades due to the preponderance of medium to heavy coated woodfree grades already produced in the region. Progress in this regard would be assisted - for technical reasons - by the availability of high quality, low cost delaminated kaolin.
Table 5. Estimated Growth Rates
Type Anticipatedgrowth % Comment Filler grades 0 Difficult to compete with locally produced materials as freight makes imports unlikely. Delaminated 7 Good prospects amongst newer producers for lightly coated paper and for opacity improvement as filler. Calcined 8 Substantial opportunities in exporting nations like Thailand, Indonesia and Korea as they compete against US and European mills using PCC fillers. No 1 Coating 3-4 Strong growth due to the pick-up in Asian economies and the trend towards higher standards of living No 2 Coating 4-6 Will grow strongly particularly in Japan and Korea as these grades form the building blocks for a coating formulation in these countries.
Source: Stratum estimates
Other Relevant CommentsKaolin competes in a market, which has a high level of product substitution as well as internal competition. Understanding the business requires knowledge of other pigments including talc, PCC, GCC, titanium dioxide, alumina trihydrate and silicas.
Precipitated silicate, produced from sodium silicate, largely by Rhodia in South Korea, and also in Japan, is gaining market-share especially in certain types of newsprint and ink jet paper. The higher cost is a restraining factor to its growth but it is certainly a titanium dioxide / pigment replacement of which to be aware. There is a continuing trend toward higher performance pigments in many markets.
Industry TrendsThe industry is changing as producers continue a steady process of merger. The number of large-scale producers today is five and could drop, perhaps eventually to three. Formerly the largest producer ECCI has recently been sold to Imetal. Thiele Kaolin and Huber are private concerns and could change ownership. CADAM is possibly also for sale.
Table 6. Estimated Growth Rates of various paper grades in Asian region
Type of paper Projected growth2001-2006* as % Comments Region as whole Several suppliers and paper makers suggest Asia’ growth in coated paper would exceed that of USA and Europe in future years. Coated mechanical 5 - 6 Coated woodfree 4 - 5 Japan Nalco especially suggested Japan’s coated paper production would rise in the near future. Coated mechanical 5 - 6 Coated woodfree 4 - 5 China Ciba, SMI, & NPI suggested this would be the strongest market Coated mechanical 5 - 8 Coated woodfree 5 - 10 South Korea Coated demand is set to rebound to growth of 3%. Coated mechanical 3 Coated woodfree 3 Indonesia Ciba suggested that after a tough two years Indonesia was ready to re-emerge as a growth country in regard to coated paper production. Coated mechanical 6 Coated woodfree 2
Source: Asia Pacific Papermaker *
Table 7. Japan Paper Industry estimated filler/coating minerals 2000-2001
Filler Tonnes‘000 % Indicativeprice / tonne Key suppliers include Kaolin 980 50 $US 235 Engelhard, Imerys, Cadam, Huber, Thiele, Para Pigmentos. GCC 395 20 $US 190 Fimitec, Imerys, Bihoku. PCC 300 15 $US 245 Okutama, Shiraishi, Marua Calcium, Yoyo Denka, Ohmi. Talc 300 15 $US 190 Japan Talc, Kami Talc, WMC, Shokosan Clay, Fukuoka. Total 1,975 100 Note: ~ 20kt TiO2 also used in papermaking.
Source: IMIL, Stratum estimates
Kaolin - Processing and Manufacturing The processing of kaolin varies greatly from company to company; each kaolin producer uses different equipment and methods and companies that use identical methods may use them at different points during processing. An example of the extensive processing of kaolin is found in those products intended for the paper industry. The greatest demand for kaolin-based pigments comes from the paper industry, which uses them to coat and fill papers and boards. There are many ways to produce these pigments. One of the methods used is the water washed process. Generally, in the processing of water washed clays, water is used as a transport and process medium involving the following steps: Blunging, de-gritting, centrifuging, brightness enhancement, filtering and drying, additional processing such as calcining, packing mainly in bulker bags or 25 kg bags and shipping. In addition some kaolin may be surface coated with silane chemical to assist in the bonding between kaolin and rubber compounds or polymers. This is an example of added value product where the value can be about twice that of an uncoated grade. Some consumers of kaolin prefer to add the silane during in-house processing. Kaolins, which have been highly processed, are called functional fillers/pigments to indicate the intrinsic value they now command. With the Environment in mind industrial white minerals are becoming increasingly popular as natural, safer and often less expensive alternatives to chemicals.