Kaolin in the Paper Industry - Focus on the Asian Region

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 Types

Kaolin 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.

Source: Stratum estimates

Indicative Prices by Kaolin Type

Pricing 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.

Source: Stratum estimates

Regional Tonnages by Kaolin Type

The 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

Source: Stratum estimates

Country Consumption Estimations

The 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

Source: Stratum estimates

Estimated Growth Rates by Kaolin Type

Market 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

Source: Stratum estimates

Other Relevant Comments

Kaolin 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 Trends

The 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

Source: Asia Pacific Papermaker *

Table 7. Japan Paper Industry estimated filler/coating minerals 2000-2001

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.

Primary author: Murray Lines

For more information on this source please visit Stratum Resources