Mineral sands sales and purchasing is typically a technically-based decision, involving metallurgical specifications and product value-in-use considerations. As a result, Iluka's sales are overwhelmingly direct to customers. Minimal amounts of product are sold via agents and distributors. There is not a significant 'traded' component of mineral sands products, nor an established industry wide or exchange traded equivalent 'benchmark' price. Iluka has recently established for the purposes, of sales to its customers, a zircon benchmark price based on its most commonly sold product.
Most high grade titanium feedstocks are sold to major pigment or titanium metal customers on contracts of varying periods, typically less than 12 months. Volumes to the welding and titanium metal sectors are usually sold on a shorter basis, usually monthly or quarterly contracts.
In 2015 Iluka introduced a new zircon pricing and payments framework. The approach entails distinct spot and contract pricing arrangements. In the spot market, Iluka will seek to maintain an absolute tonnage in order to react to short-term changes in the company's operations and/or to participate in the spot market as a price discovery mechanism.
For customers purchasing zircon via contracts, the price model involves a regional reference or benchmark price and clear, pre-defined customer price logic for price variation. From an initial 'gross' price, Iluka will differentiate the 'net' price for customers based on volume, share and cost-to-serve. The framework will also reward customers' loyalty and reflect payment and other commercial terms. Price setting is expected to be on a quarterly basis.
More information on Iluka's marketing approach can be found at www.iluka.com and in Iluka's Briefing Paper "Marketing and Market Development, May 2015" in Further Information below.
The following table provides weighted average received prices for Iluka's main products on an annual basis between 2010 - 2015. Prices are influenced by product specifications and quality, lot size sold, contractual and customer arrangements.
|Iluka Price US$/tonne FOB
| Synthetic rutile
| Average AUD/USD (cents)
Iluka's synthetic rutile sales are, in large part, underpinned by commercial off take arrangements. The terms of these arrangements, including the pricing arrangements are commercial in confidence and as such not disclosed by Iluka. Synthetic rutile, due to its lower titanium dioxide content than rutile, typically is priced lower than natural rutile.
Zircon prices reflect the weighted average price for zircon premium and zircon standard, also with a weighted average price for all zircon materials, including zircon in concentrate and zircon tailings. The prices for each product vary considerably, as does the mix of such products sold period to period. For example, Iluka sold more zircon standard and zircon in concentrate in the second half of 2015 compared with the first half of 2015 and more in 2015 than 2014. In the case of rutile, Iluka sells a lower titanium dioxide product, HyTi.