- Iluka has (again) lifted zircon and TiO2 price guidance
- Stockbrokers have responed by (again) lifting earnings estimates
- Not everyone sees a higher share price ahead


By Chris Shaw

Mineral sands play Iluka ((ILU)) has enjoyed strong price increases for its products in recent months, which has driven strong share price performance. The good times appear to have further to run, as an update from management this week indicated while zircon price guidance was largely in line with expectations, TiO2 price guidance was higher than most in the market had anticipated.

Deutsche Bank notes guidance for the second half of 2011 for TiO2 implies 70% price gains relative to the previous half, while zircon prices are expected to increase by 35-40%. The increases reflect a continued tight market for both products, as well as price increases secured by pigment producers over the past six months.

As RBS Australia points out, Iluka's customers understand the need to provide incentives for new mine capacity after a prolonged period of relatively flat prices. The latest price increases reflect this understanding, with RBS expecting once pigment prices become more stable Iluka will receive more push back in pricing negotiations.

Iluka supplies over 30% of the world's zircon and is the second largest producer of TiO2. With shortages in both markets likely to continue until around 2013/14, Deutsche Bank suggests Iluka is in a powerful market position.