JOHANNESBURG (miningweekly.com) – The world’s largest zircon producer, Iluka Resources, has unveiled plans to adjust its production base in response to the weak demand for its major products.

Iluka MD David Robb said that market indications suggested that inventories have now been substantially drawn down, and that customer orders for mineral sands products, and zircon in particular, would recover over the remainder of 2009. However, he stated that lower prices would not necessarily increase demand.

“. . .the prudent course of action is to match current production to lower estimate for forward demand, while completing its major projects,” he said in a statement on Tuesday.

The Australia-based Iluka now planned to curtail its 2009 zircon production by about 20%, to about 350 000 t, while also reducing combined rutile/synthetic rutile production by about 10% to more closely match short-term demand estimates.

Most of the reduction in production would occur in the lower margin parts of Iluka’s existing business, and was consistent with actions incorporated in the group’s current five-year plan, although being implemented earlier.

The production changes, as well as a review of its Western Australian operations and organisational structures, would result in the reduction of up to 135 positions, Robb added.

“Iluka will seek to mitigate the impact on people involved, as it has done successfully elsewhere through redeployment to other operations, where practicable, and through other steps to assist employees affected.”

The company retained it strong confidence in the medium-term fundamentals for the industry, driven by economic growth and urbanisation in developing markets.

“In essence, the global economic crisis has required that some planned operational changes must be brought forward, and it will delay the initial realisation this year of the financial benefits for shareholders of Iluka’s transformation. The intent, from the announced initiatives, is to position Iluka in the most robust manner in what is a fluid and challenging set of global economic conditions and through a coordinate supply response, which preserves future flexibility, ensure that Iluka is in a strong position to capture the benefit of demand recovery, particularly in developing economies,” Robb concluded.

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