Altech Chemicals Ltd (ASX:ATC) has commissioned a market research report for global high purity alumina (HPA) demand to support project debt funding for the proposed plant in Malaysia.
The report noted that global HPA demand grew 19.5% in 2015 compared with 2014 and demand is forecast to remain strong, growing at 16.7% annually through to 2024.
Altech is aiming to become one of the world's leading suppliers of 99.99% HPA through construction and operation of the proposed HPA plant in Malaysia.
The plan is for the HPA plant to process raw kaolin mined and shipped from the company’s 100% owned Meckering kaolin deposit located in Western Australia.
Iggy Tan, managing director, commented:
“This latest HPA market analysis report confirms the robust outlook for global HPA demand and the HPA pricing assumption used in the financial model for the company’s proposed Malaysian HPA project.”
High purity HPA
The report confirmed that demand for high grade 4N HPA, which Altech is targeting, is forecast to continue to dominate the HPA market and account for 72% of overall HPA demand in 2024.
This validates Altech’s strategy to focus exclusively on the 4N HPA market, due to the size and growth of that market segment.
Industry participants opined that the majority of buyers would prefer sourcing HPA from single large suppliers rather than relying on several small suppliers.
The lithium-ion battery sector is seen as a blue-sky growth opportunity for the market as manufacturers utilise HPA as a separator coating material.
Pricing and market share
Prices are anticipated to stabilise at around US$28 per kilogram, particularly for 4N HPA used in sapphire applications.
The report agreed that the assumed price of US$23 per kilogram in Altech’s financial model was reasonable.
The assumed price is conservative and once the company achieves said production of 4,000 tonnes per annum, Altech can aim for an estimated market share of 10% in 2019.
Threat of substitutes
The threat of substitutes for the HPA market is relatively low. No suitable alternative is available for use in applications requiring HPA.
The bargaining power of HPA suppliers is expected to remain high, with relatively few HPA producers globally.
The bargaining power of HPA buyers on the other hand was assessed as moderate-to-low, primarily due to the large number of businesses consuming HPA versus the relatively low number of HPA producers.
Analysis
The market research report on the global HPA demand is supportive of Altech’s ambitions to construct a plant in Malaysia.
The report confirms the low-cost/high purity of the acid-leach processing that Altech has adopted for its Malaysian HPA plant.
It also confirms the continued strong bargaining power of HPA producers and the low level threat of substitute products for HPA.
Given the report’s findings around the economic viability of the proposed plant, this should act as a valuable tool throughout the project financing process.