Strategic Metal Report

From Kobolds to Goblins: The Full History of How Cobalt Got Its Name

The subterranean spirits are those who dwell in caverns and other recesses of the earth, where they kill or suffocate or render insane miners in search of precious metals. The Germans call them Kobolds. They are gnomes, dwarfs not over an ell in height, and they help in cutting stones, getting out metals, packing them in baskets and hauling to the surface. They laugh and whistle and perform a thousand tricks, but their services often redound to the injury and death of those whom they serve. They cut the ropes, break the ladders, cause the fall of rocks, send poisonous vapor; and you will see rich mines abandoned for the fear of them . . . It is they who cause earthquakes . . . They are not only the guardians of the mines, but of hidden treasures, which they allow no one to take… 

-Pedro de Valderrama (c. 1617)^[1]

By the 16^th century, the Ore Mountains of Saxony (known in German as the Erzgebirge) had already been mined for silver for over three centuries. The Ore Mountains run south of Freiberg along what is now the German-Czech border, extending for about 150km (90 miles) east to west and 40km (25 miles) north to south. 

One of the earliest references to mining in the area was in a contract dated in the year 1237, which noted a number of swords would be paid for with “good silver from Schneeberg”, one of the key mining centres of the Erzgebirge.^[2]

Misappropriation of Over US$100 Million Linked to Vital Materials Co. Chairman Zhu Shihui

Nearly five years after the Fanya Metal Exchange halted trading in 2015, the last of the stockpile of minor metals amassed by Fanya were finally auctioned off in early 2020. And, so, the book seemed closed on the story of the short-lived Chinese minor metal investment scheme.

But, here we are one year later, and it is beginning to look like there will be more to this story.

On January 10, 2021, a lesser-known, publicly traded Chinese aluminum alloy company (Harbin Zhongfei New Technology Co. Ltd.) released a public statement advising that RMB 831 million (approximately USD 129 million) in company funds had been withdrawn by the company's Actual Controller*, Zhu Shihui, and transferred to companies that he is affiliated with. 

The Continuing Saga of the Fanya Metal Exchange

The ongoing saga of the Fanya Metal Exchange (Fanya) continued last week with the Kunming Intermediate People’s Court levying a fine of RMB 1 billion (about USD 149 million) and sentencing 21 defendants associated with...

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Strategic Metal Report Restart & Looking Towards 2017

It has been a while since I last updated the Strategic Metal Report blog, so I apologize to those readers who had been relying on the site for market updates. Having recently completed my writing contract at About.com, I now have more time to again focus on those metals of more interest to myself, minor and strategic metals...

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Minor Metals Market Update - December 2015

The tone among presenters and delegates at this year's Argus Metal Pages China Metals Week (held November 17-19th in Guangzhou, China) was the most subdued since 2009. 

With minor metal prices following the trend of base metals and other commodities over the past twelve months - touching five to ten year lows - there was not much for delegates to be optimistic about. 

Most agreed that the uncertainty that hangs over the indium market as a result of the Fanya Metal Exchange's implosion will not disappear anytime soon. This drag will likely continue so long as the 3600 metric tonnes of indium that Fanya purports to have sitting in warehouses remains embroiled in a feud between investors and the Exchange. 

The Yunnan provincial government authority tasked with investigating Fanya's activities has, itself, already stated that the investigation could take some time. 

Chinese Regulators Concerned About Irregularities at the Fanya Metal Exchange

The limited number of postings made on SM Report so far this year is fairly reflective of the lack of newsworthy events impacting the minor and electronic metal markets.

With readily available material and limited spot deals, gallium and germanium prices have effectively been pegged for months. Indium, meanwhile, which soared in 2013 on the back of the Fanya Metal Exchange's enormous purchase announcements, has seen prices level off for most of 2014 despite continuing, incredible weekly purchases by the Exchange.

The monotony may have come to an end this week with a report published - albeit temporarily - on the China Securities Regulatory Commission website that explicitly named the Fanya Metal Exchange as an area of very high concern.

(Note: the original article has now been taken off the website, but a .pdf version, with English translation, is available at the bottom of this posting).

According to the report, which appears to summarize the minutes from a recent meeting regarding the Yunnan Stock Exchange Tidying and Reorganization Project, spot inspections of the Fanya Metal Exchange uncovered "irregularities" in the organization's operations, that risk stemming from the Exchange is "very large" and that immediate corrective action should be taken.

Chinese Monetary Policy & Metal Prices

For the second time in less than a year, China's central bank - the People's Bank of China (PBC) - has moved to moderate the country's shadow banking sector by limiting lending to banks, leading to higher borrowing rates.

A similar effort was made in June of last year, which resulted in a sudden increase in demand for copper, as cash-strapped borrowers were able to get lower interest rates on USD loans financed using copper as credit.

This time, however, the PBC's effort to tighten liquidity was strategically coordinated with a significant depreciation in the RMB - USD exchange rate, the currency's largest depreciation against the dollar since becoming de-pegged in 2005. The depreciation was an effort to deter speculators who profited from the spike in interest rates last June.

With all this monetary action in the world's largest metals economy, SM Report has finally come back from a longer-than-planned break to look at the effects that these developments are having on the market for minor and strategic metals.

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.

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.