Supply and demand: the global gypsum market

At present, Asia’s dominant supplier, Thailand, is unlikely to capitalise on its remaining gypsum resources, due to local supply constraints anticipated in the future. Supply from Iran will be restricted to the UAE, Qatar, Kuwait, Bahrain, and the West Coast of India. The Sultanate of Oman will therefore become a significant supplier, on the back of its rapidly growing gypsum industry. Thus, even with an aggressive upside supply scenario from Oman, the gypsum demand/supply deficit will widen, cumulatively, by over 60 million t between 2017 and 2026, creating a lucrative market for Omani gypsum. The gypsum demand will be large enough to accommodate new import supplies from Turkey, Spain, and Mexico.

Supplying gypsum

Cement manufacturing accounted for roughly 61% of the estimated 252 million t of gypsum produced globally in 2015, with gypsum board industries consuming 33% of the total. Global gypsum demand is projected to grow by an average CAGR of 10%, to reach 870 million t by 2026. Major driving demand comes from India and the ASEAN countries.

Imported gypsum demand across Asia and South/East Africa is projected to soar from 16.50 million tpy in 2015, to 23 million tpy by 2020, rising to over 40 million tpy by 2026. This amounts to a cumulative demand of over 80 million t from 2017 to 2020, and over 273 million t from 2017 to 2026, driven primarily by strong growth in the cement and gypsum board production segments.

Thailand is unlikely to capitalise on its remaining gypsum resources

Asia’s dominant supplier, Thailand, is unlikely to capitalise on its gypsum resources due to local supply constraints anticipated in the future.

Gypsum export has been controlled by the Department of Primary Industries and Mines (DPIM), through the non-issuance of new mining licenses and exports being strictly under a non-marketable quota system. As part of the strategies for maximising the economic and social benefit accrued to the country from the export of gypsum resources, DPIM is setting the gypsum FOB selling price, currently US$18.50/t.

Natural gypsum supply from Iran

Historically, Iran’s local construction industry consumes around 90% of its total gypsum production (over 14 million tpy). The remaining 10% is exported mainly to UAE, Qatar, Kuwait, and the west coast of India.

Local gypsum demand in Iran is expected to double in coming years, along with a major increase in the local selling price, due to the massive expansion of infrastructure and housing projects. In response to increasing local demand, gypsum exports are expected to remain capped at around 10% of the total production.

Furthermore, the construction industries in the UAE and Qatar will continue to expand, as investment in infrastructure, commercial, residential, and energy projects continue to drive growth. The FIFA World Cup 2022, World Expo 2020, housing, and several infrastructure projects in the UAE and Qatar are driving cement demand, which could lead to an increase in demand for imported gypsum.

Omani gypsum exports have been growing quickly

Oman is on track to be crowned the world’s largest exporter of natural gypsum by 2018, on the back of surging output that underscores the immense potential of the country’s mining sector to fuel the nation’s long-term economic development.

Exports are projected to surpass 8 million t in 2018, up from 5.85 million t at the end of 2016. This is a phenomenal increase that industry experts say will position the country as a global supplier of minerals in the coming years.

Oman’s gypsum export volumes have jumped twenty-fold over the past five years, from a mere 0.30 million t in 2010 to 5.85 million t last year. This increase has been driven, primarily, by galloping demand in India, Japan, Taiwan, Indonesia, Vietnam, and Bangladesh. Oman has emerged as the single most important source for high-grade natural gypsum for cement and gypsum board manufacturers across Asia and South/East Africa.

In a major development, which bodes well for a strong uptick in Omani gypsum exports, top executives from the leading gypsum mining companies have unanimously endorsed new regulations, issued by the Public Authority for Mining (PAM), prescribing a minimum FOB export price for gypsum.

The endorsement came at a meeting of company chief executives held earlier this year. Also at the meeting, the attendees agreed to establish the Oman Gypsum Association (OGA), a non-profit pan-industry grouping that advocates for, among other things, the best practice in gypsum mining, community support initiatives, and minimum FOB pricing limits that consider Asian demand and supply, and other measures aimed at supporting the growth of the domestic gypsum industry.

Alarmed by a downtrend in gypsum export prices, attributed to unhealthy undercutting by some players, PAM stepped in last month to fix a minimum export FOB price for raw gypsum at US$12.50/t, with effect from December 2016.

Consequently, Omani gypsum exporters are barred from exporting raw gypsum below this designated price. Those found in breach of this regulation will be denied export permits, while repeat offenders are liable to have their mining licenses cancelled altogether.

These latest developments, and their beneficial implications for the positive development of the gypsum mining sector, have been welcomed. Gypsum exports have the potential to drive GDP growth through enhanced non-oil exports. The Oman Gypsum Association’s main mission is to promote the Omani gypsum mining industry, which has the potential to fuel long-term economic growth by boosting the sector’s contribution to GDP through heightened exports.

During 2010 – 2013, Omani gypsum used to be traded at the FOB price of above US$14.50/t. However, despite the country’s advantageous geographical position in exporting gypsum to Asian countries, Omani gypsum was traded at far lower FOB prices during 2014 and beyond. This peculiar situation was the result of price undercutting by Omani exporters, due to lack of coordination between gypsum exporters, to the detriment of the export industry and the wider Omani economy in general.

Conclusion

Asian cement and gypsum board manufacturers, which are the main consumers of imported gypsum, have already started to face supply and pricing challenges – a trend that is likely to continue in the coming years. Identifying and ensuring a consistent supply of gypsum has become imperative for cement and gypsum board producers.

After factoring in Omani gypsum supplies to the Asian market, there is still a supply deficit of over 12 million t during 2017 – 2020, and over 60 million t during 2017 – 2026, that needs to be filled. This opens opportunities for Turkey, Spain, Mexico, and so on, which can target the Asian market; their landed cost will be far higher than Omani gypsum, however The tightening demand/supply scenario will be reflected in an upward trend in Omani gypsum FOB prices going forward.

This article first appeared in the April 2017 issue of World Cement.