Strategic Metal Report

Indium & the Investment Industry

One topic that has repeatedly appeared in reports about the indium market over the past year is the increasing influence of investors on demand for the metal.

Since 2011, the investment industry has grown to become a significant consumer of indium. In China, two commodity exchanges allow companies and individuals to electronically trade contracts of the metal, while in Europe and the West, private asset companies offer opportunities to make investments backed by various minor metals, including indium.

The potential impact on the market comes from the fact that the inventories held by these investment companies and exchanges can be removed from the market for indefinite periods, depending on investors' goals and expectations.

One of the lead sponsors at this year's World Indium and Germanium Forum, which recently concluded in Kunming, China was the Fanya Metal Exchange, which began offering investors an opportunity to trade units of indium via their online trading platform in 2011. The investors trading on the Fanya Exchange can trade indium in units as small as 500g, while prices are quoted in 100g units.

As the Fanya Metal Exchange promoted and grew interest in the metal amongst investors, it also significantly increased its inventory holdings of indium, which caught the attention of both consumers and refiners.

Many in the industry have questioned the disconnect that seems to exist between electronic trading of indium and the physical market for the metal. This divide is highlighted by the price differential between the Fanya Metal Exchange's price, which is presently over $900/kg of 99.995% min. indium metal, and the physical market price, where equivalent material is currently available for prices around US$ 540/kg.

For both producers and consumers of indium, the concern is that increasing speculation and hoarding of the metal will cause a spike in prices, which would stifle development of new downstream markets for indium products.

One does not have to look any further than the impact that investors and speculators had on the rare earth (RE) industry in 2009 and 2010 in order to understand how much price volatility can have on demand.

By-Product Metals: The Aluminum-Gallium Relationship Pt. II

Now that we understand the importance of the relationship between primary metal production and the extraction of minor metal by-products, we can discuss some of the effects that this relationship has on the supply of gallium.

Driven by demand for electronics, particularly flat panel displays (FPDs) and smart phones, consumption of gallium has grown by an estimated 5 to 10 percent per annum over the past ten years. Yet, over the same period, the market price for 99.99% gallium has fallen roughly 30 percent (based on current market price of USD 290/kg for 4N gallium metal).

Gallium forecasts still predict substantial demand growth over the following three to five years, as the market for FPDs continues to expand. FPDs, such as those found in smart phones and tablet computers,

By-Product Metals: The Aluminum-Gallium Relationship Pt. I

Save for few exceptions, minor metals are produced as by-products during the process of extracting primary, often base, metals. But it is this dynamic between primary and by-product metals, which is at the core of understanding most minor metals markets, that still confounds many analysts, resulting in inaccurate assumptions and misguided conclusions.

In this two-part study, SM Report takes a look at the sometimes complex relationship between primary (or source) metals and by-product (or minor) metals in order to better understand the production and supply of such metals.

As by-products, the supply of most minor metals is heavily dependent on the extraction of source metals and, as a result, the market for the source metal heavily influences the availability of by-product metal. That is because the market for the source metal guides business decisions regarding extraction rates.

But what does this mean? The relationship between gallium and aluminum provides a good example.

Gallium Market Update - December 2012

After gallium prices attempted to wake from their slumber in October, market disinterest forced them back down in November. By the end of the month, prices had returned to the US$ 290-310/kg range (FOB 99.99% min.) where they have been for much of second half of 2012.

The story continues to read the much like it did back in the spring: Significant production capacity increases coming on-line at a time of struggling economic growth have resulted in the lowest spot prices seen in years.

Although forecasts remain optimistic about growing demand from gallium's core markets, electronic wafers and LEDs, so far the market has been unable to digest the roughly 100MT per annum increase in production capacity that has recently become available.

Two questions remain: When will greater demand for gallium materialize? And will producers be able to wait out the storm until it does?

Minor Metal Market Update - October 2012

Strategic purchasing and materials being held from the market have pushed prices for many minor metals higher in recent weeks.

Despite high inventories, tellurium prices rebounded in Q3 after nearly a year of steady decline, in large part due to many high purity refiners refusing new offers.

Germanium prices appear to be stabilizing at the start of Q4 after an unanticipated run-up of nearly 70% since April. The jump in prices spurred buying activity - particularly for germanium dioxide - over the summer months.

Indium prices, meanwhile, have been pushed higher by the Chinese State Reserve Bureau's (SRB) purchases of the metal at above market prices. Purchases by the SRB in the second half of 2012 may end-up accounting for as much as 15% of global production this year.

With large inventories to draw on, whether indium's price gains stick will largely be dependent upon how much purchasing activity is seen in the remaining months of 2012.

High inventories of 99.99% gallium continue to drag on prices for the metal. While offer prices increased slightly in Q3, it may be some time before consumption increases to levels high enough to absorb excess inventories that have built up since new production was brought on-line earlier this year.

Indium Market Update - September 2012

Despite high inventory levels in China, the price discrepancy between Chinese and non-Chinese indium looks like it will persist through September. 

While prices for 99.99% indium metal remain around USD 560/kg in China, supported by the recent state stockpiling purchase of 60 metric tonnes, prices elsewhere have been trading between USD 470-500/kg.

Although many Chinese producers are holding inventory of the metal and stocks at the Fanya Metal Exchange in Kunming recently reached record high levels, metal imports have been reported through the summer, as financial exchanges trading indium have sought cheaper sources to meet their inventory requirement levels. 

Germanium Market Update - July 2012

The evolution of the germanium market in 2012 continues to leave a trail of confusion.  Most recently, price increases in June seemed to contradict reports of persistently slow demand from traditional consumers. Let's take a look at some recent developments to see if we can make sense of the influences that are shaping this market.

After sluggish sales drove germanium prices down in the first quarter of 2012, spot sales stagnated between March and June, leaving many expecting prices to continue downward.

Price discrepancies between Chinese-produced germanium and non-Chinese produced materials arose, as competition over the limited number of orders available pushed prices toward their 5-year low. These price discrepancies reflected differences in willingness to accept lower prices between Chinese and non-Chinese producers.

Germanium Market Update - April 2012

Asianmetal.com's annual Indium and Germanium Forum concluded last week in Kunming, China, with the mood amongst germanium producers and traders much more downbeat compared to a year earlier.

With germanium prices dropping again in early April in the face of slow sales, prices have now shed their increases from late 2010 and early 2011.

However, with germanium prices nearing their 2010 nadir, rumblings continue that major Chinese producers may move to increase offer prices in order to stimulate purchasing.

If this is the case, prices can be expected to move upward in May and June. Otherwise, germanium prices may begin to flat-line. Since 2006, germanium sellers have shown repeated resistance to prices below US$ 1000/kg, indicating that they are closing in on production cost values.

The US, EU and Japan Take China's REE Export Policies to the WTO

In the first WTO case to be filed jointly by the US, EU and Japan, the three industrial powers will argue that China's REE export restrictions are not in accordance with the coutries obligations under its accession to the WTO. 

Following the WTO Dispute Settlement Panel's decision last year regarding Chinese restrictions on numerous other raw materials, including  bauxite, fluorspar, silicon carbide, coke and zinc, which found Chinese export and licensing systems not in compliance with their WTO requirements, many were expecting a complaint regarding REEs to follow.

For more on the WTO and China's raw material export regulations, click here.

For more coverage on the REE WTO complaint:

• BBC News: US, EU and Japan challenge China on rare earths at WTO
• Reuters.com: U.S., EU, Japan take on China at WTO over rare earths
• Bloomberg Editorial: Obama’s Rare-Earths Case With WTO Won’t Ensure Security

Gallium Market Update - March 2012

As gallium prices continue to hover around their lowest level in years, recent reports from China suggest that some factory expansions may be temporarily shelved until prices rebound.

At least one major producer has already opened a second production line - doubling its capacity - in recent months. 

While gallium sales remain fairly strong, spot gallium prices, which have dropped from a high of over US$ 900/kg in mid-2011 to near US$ 400/kg, have fallen in large part due to more mature recovery systems to collect recycleable gallium in Europe and North America and to growing primary production from capacity expansions in Asia.

Image courtesy of Metal-pages.com