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.
A little background is needed here: For many years, China has been the major producer and supplier of polycrystalline germanium metal and germanium dioxide, the most traded forms of germanium. China's natural wealth of germanium resources, an established refining industry along with steady and growing demand for the minor metal resulted in China becoming the world's dominant source and price-setter for the international spot market. Non-Chinese producers, who generally are not as dependent on the one metal as most Chinese producers, were satisfied to take prices at, or just below, their Chinese counterparts.
The severe drop in demand that plagued the first half of 2012 allowed non-Chinese production to satisfy the majority of global demand and, in turn, put non-Chinese producers in direct competition with each other. As a result, for the first time in years, non-Chinese producers were setting the market price for germanium, while Chinese factories were left to decide whether to sell at a loss or wait for better prices.
By late spring, the waiting game began to wear thin.
In May, some of the largest Chinese producers started holding back material, hoping to spur prices and motivate buying activity. Domestic prices rose slightly, but demand was still limited enough to be satisfied by inventories and production outside of China.
On June 7th, Yunnan Germanium announced that they had signed a supply deal with Hanergy that would supply the alternative energy company, which is one of China's largest photovoltaic cell producers, with 375 metric tonnes of germanium dioxide over the next 6 years, an amount roughly equal to 50% of global germanium production per year (assuming current production numbers).
The announcement raised some eyebrows, and many questions, while the limited and delayed response by the market emphasized a degree of skepticism.
Nevertheless, the recent activities and efforts by major producers to increase sales - and prices - may have set the tone for the remainder of 2012. Large Chinese producers are loath to sell spot material at prices under US$ 1200/kg (germanium metal) and US$ 1000/kg (GeO2).
But whether the market can sustain these prices, of course, will ultimately depend upon consumption. If germanium consumption levels remain as depressed as they were during the first half of 2012, it is hard to foresee prices not being pulled back down. However, even a small increase in demand may encourage international suppliers to follow the Chinese lead, bringing a return to the structure that the germanium market has become accustomed to.
Image courtesy of Metal-pages.com