The trigger for the new gloom was the downbeat assessment of the industry's near-term prospects by analysts who attended a recent annual talkfest, the TZMI-hosted conference in Hong Kong.

 

Among those to downgrade profit and share-price performance expectations for industry players was Goldman Sachs.

 

"The outlook for mineral sands remains challenging. Demand growth should accelerate in 2014 as the titanium feedstocks market emerges from a destocking cycle but the need for ongoing supply discipline will remain," the firm said in a research note.

 

It said the long-term rate of demand growth for both titanium feedstocks and zircon was likely to be weaker than expected as customers continue their efforts to use mineral sands more efficiently, and to seek substitutes. Goldman said that, in a way, the mineral sands sector had become a victim of its previous success. "When supply started to break free of long-term contracts, prices increased up to 400 per cent above their historical level," Goldman said.

 

"The scale of the price increase and the implied risks to security of supply encouraged consumers to reduce consumption via thrifting and substitution. Spot prices have given up most of their gains, but efforts to reduce consumption of zircon and TiO2 across a broad range of applications continue."

 

RBC Capital Markets said the Hong Kong conference closed with a "fairly bearish tone for the near term on mineral sands prices, though the mood on some products did lighten somewhat towards the end of the three-day event".

 

"The message, however, is pretty clear that while there are signs of some bottoming in ilmenite, in particular, the market for rutile remains fragile and is unlikely to see any material improvement until well into 2014.

 

"For the titanium dioxide suite of products, another key factor is what Rio Tinto does with production and prices."

 

The share price of leading producer Iluka has buckled since the conference concluded and the negative analyst reports began to flow. At Friday's closing price of $9 a share, it is down 10 per cent in the past 10 trading days. Share prices of other producers and a number of explorers/developers have also suffered.

 

RBC said it had lowered its price forecast for zircon (used in tiles and ceramics) next year by 14 per cent to $US1200 a tonne, and prices for rutile (pigment, paint, plastics and titanium) by 20 per cent to $US1150.

 

That led to a revised profit forecast for Iluka for next year of $121 million －－ less than half previous market expectations for $260m based on Bloomberg consensus figures. "Consensus (figures) is factoring in a sharp price and volume recovery in 2014. We believe this will have to be revised," RBC said. It slashed its price target for the stock from $12.50 to $8 a share.

 

Goldman moved Iluka from a "neutral" investment position to a 'sell", setting a target of $7.50, down from $9.87 previously.