TOKYO, Aug. 12 -- China's Hunan Zhuye Torch Metals, or Zhuzhou Smelter, plans to suspend indium ingot exports for the rest of the year due to low prices, Wang Jianjun, the company official in charge of exports told Platts Wednesday.
The company continues to produce indium (minimum 99.99% purity), but does not plan to export as current prices at $330-340/kg CIF Japan, are too low, Wang said.
"All metal prices have increased and indium prices should be at least $500/kg," Wang said. He added that operating costs would go up as a result of high inventories.
Zhuzhou Smelter, also a major zinc producer in China, is the largest exporter of indium in the country with a license to sell 19 mt of indium overseas in the second half of 2009. The company has a 20% share of the Chinese indium export market.
Zhuzhou Smelter, based in the Hunan province, has a capacity to produce roughly 30 mt/year of primary indium.
Sources at three other indium producers in China, each with over 10 mt/year production capacities, told Platts Tuesday that they too had suspended exports as well as domestic sales, on low prices. Like Wang, they said prices should be over $500/kg as prices of other metals such as copper and nickel have risen sharply in the last month.
The view -- that the market undervalues indium prices -- is shared among producers outside China.
A source at an Asian producer said, "Every commodity price is going up. Compared with them, indium is hardly moving at all."
According to Platts assessments, indium prices for export to Japan were $330-340/kg CIF this week. The prices were $265-270/kg CIF on the week of July 13, $260-270/kg CIF Japan on the week of June 15, and $280-300/kg CIF on the week of May 11. Prices have gained 15% in the last three months.
Meanwhile, prices of metals traded on the London Metal Exchange surged by 20-60%. Prices of nickel cash contracts, that averaged $12,618/mt in May, settled at $20,175/mt Tuesday -- up 60% in three months --.
French bank Societe General warned in its weekly commodities report this week that the nickel price rally appears to be running ahead of market fundamentals. But the bank also said a major fall is unlikely due to positive investor sentiment for the metal.
INDIUM PRICES FIRM
Prices of indium for export to Japan, the world's largest consumer of indium, gained $20/kg this week according to Platts assessments, but market sources said the rise in prices had little to do with Chinese producers suspending exports as Japan does not rely heavily on Chinese supply, importing only 100 kg in June. However, Japanese demand accounts for over 60% of global demand, according to industry data.
Not all Chinese producers have suspended exports either. There were at least two other Chinese producers offering to sell this week.
It was the reduction in Japanese domestic supply that impacted the market more, according to consumer and trade sources. A major Japanese recycler with over 100 mt/year of capacity suspended spot sales this month as the company had sold out its metal, a company official told Platts last week.
Due to tightening domestic supply, local spot prices have risen to above Yen 30,000 ($320)/kg delivered, from Yen 27,000/kg last month, a consumer said.
A deal was reported this week for less than 500 kg at $330/kg CIF Japan.
A Tokyo trader said the solder and electronic industries were running low on indium stocks and had started to ask for small cargoes of less than 500 kg. But demand from the larger user, indium-tin-oxide makers, who consume over 20 mt/month of indium, was still lacking. One ITO maker source said his company had enough stocks for the moment.
MARKET BULLISH
Japanese trade and consumer sources agreed that indium prices are likely to firm further, on demand increase from the flat panel display sector in Japan, South Korea and Taiwan, while supply tightens.
Some traders said they were more concerned about some crude indium plants forced to shut in China following the recent cadmium spill incident in the Hunan province, rather than producers suspending exports.
Crude indium with 99% purity is used by some producers, who don't operate zinc mines, as feedstock for refined 99.99% indium ingots. Zinc concentrate contains indium, and zinc producers in China produce indium as a byproduct.
Reduction in crude indium supply, means decreased indium production and can impact the market more than producers stocking up.
Some Japanese and Chinese sources said that China's State Reserve Bureau, planned to buy 200 mt of indium for the national stockpile, but has only bought 30 mt so far, which means there is at least 170 mt excess supply in China.
Also "because of possible rise in prices, traders want to keep stocks, for the future," one Asian producer source said.
A source at a Chinese producer in the Guangxi province said: "Some investors want to stock indium, some individuals too, for indium possibly reaching $1,000/kg."
Prices had hit $1,000/kg CIF in 2005, when demand from the flat panel display sector surged. Current market conditions bore some similarities to 2005, a Japanese consumer said.
PRICES UNLIKELY TO HIT $1,000/KG: BUYERS
"Demand is recovering from a slump ... flat panel display production is not doubling, tripling as it did in 2005," one Japanese trader said. He said prices rising to $500/kg is a possibility with traders stocking up.
"Will prices over $500/kg have enough support from fundamentals?" the consumer source said, adding that supply eases as prices rise and the current tight market conditions may not last.
The second trader added that after prices shot up to $1,000/kg, recovering indium from electronic scrap became active in Japan. There are over six recyclers in Japan recovering over 300 mt/year of indium from scrap, according to industry sources. The recycled resources account for over half of Japan's indium consumption.
There are more companies recovering indium from scrap in Taiwan, Laos, South Korea and in China as well.
The rising indium prices would provide a strong incentive to recycle indium and prevent prices from shooting up to $1,000/kg CIF, the trader said.
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