2011 was for the minor metals, like it was for many commodities, a year of two halves. The first few months saw prices rising to near - and sometimes past - their pre-financial crisis levels, as end-users breathed a sigh of relief when the worst of the crisis seemed to have passed. But the euphoria was short-lived.
By June and July, it was becoming evident that the sovereign debt levels in the US and Europe were going to weigh heavily on governments' abilities to continue supporting economic recovery with further fiscal stimulus. Markets and commodity prices stuttered. Copper started to fall from its record levels by the end of July and the industrial minor metals, molybdenum, cobalt, tungsten and manganese, followed.
By September, all eyes had turned east to see whether China could pick-up the slack in demand, as it had two years earlier. But China's hands seemed tied as it continues to try and address inflation and liquidity issues that have stemmed from its 2008 monetary stimulus.
In the face of declining demand, inventories of the electronic minor metals - indium, gallium, germanium and tellurium - continued to increase and prices began to drop, with indium falling 25% to under US$ 650/kg by year-end and gallium falling roughly 30% from its peak near US$ 1000/kg in June.
The good news is that many of the economic issues that have plagued major economies for years are finally being acknowledged and addressed. The period of blind optimism that drove metal prices to record levels this year, while the world's largest economy tinkered with the idea of defaulting on it's national debt and the world's largest economic union seemed at risk of falling apart, has (thankfully) passed. Recovery may take some time, but at least it has begun.
Looking back to where we stood one year ago may provide some perspective on what exactly happened to the minor metals in 2011. At the beginning of the year, we made 5 predictions for the minor metals market. Let's see how we did:
1. Rare Earth: More Headlines, Less Action:
In hindsight this one seem seems more obvious than it did at the end of 2010. With the price increases experienced in 2010, rare earth end-users were looking around for options to their rare earth needs and 2011 began with lower orders. Soon after the second batch of export quotas was released, it became apparent that Chinese exports would not meet quota levels and prices began falling - and fast - to try to make up the difference, which they never did.
2. Inflation, Inflation, Inflation:
The price rises we foresaw did come in the first half of the year, particularly as a result of the monetary stimulus in China pushing cash - and credit - into the hands of companies and devaluation of the USD, the currency in which the metal transactions are most often completed. Efforts to limit access to credit by China, in order to deal with inflation, however, seemed to damper things by the second half of the year.
3. Antimony – More of the Same:
After antimony soared from US$ 5,000/MT to over US$ 10,000/MT in 2010, the question was whether the new price level would stick. Being based mostly on Chinese industrial and environmental policies, we thought it was a safe bet that the new prices levels would be sticking around. In 2011, antimony prices ranged from US$ 12,000-$16,000/MT.
4. The Return of Photovoltaics:
"With energy prices continuing upward and greater investment in green energy infrastructure projects – particularly in China – demand for all these metals (indium, germanium, gallium and tellurium) will receive a boost. Combined with declining inventories, price increases of greater than 20 percent may be in store in 2011."
We had it right in the first half of the year. After seeing gains of 20% or more by mid-year, yet by year-end all but indium prices are down from the same time last year.
5. Limited Resources Continue to Drive Zirconium and Selenium Prices:
This was another prediction that followed our expectations for most of the year. Selenium's was hit hard in November, however, it's fall being emphasized by its run-up in September.
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