Life after Fanya: Antimony price rally stalls

Chinese antimony metal prices have slipped below profitable levels, indicating a gap between actual and expected demand that is leaving market participants struggling to gauge where prices might hit a floor.

Chinese state-controlled Minmetals stepped in on 31 August and purchased and stockpiled all 18,661t of antimony metal held by the bankrupt Fanya metal exchange. Prices jumped in China, the US and Europe as a result (see chart). And there were strong expectations that prices would continue to rise at a moderate pace based on higher prices in China, the world's biggest supplier. Prices had slumped by almost a third ahead of the antimony auction. Chinese export prices for grade II metal fell to $5,600/t fob from $7,800/t fob at the end of January, when the first ever auction of Fanya stocks was announced, for 34t of indium. But after rising by 7pc in four weeks — with Argus assessing European prices for grade II and trioxide grade metal at $6,312/t ex-Rotterdam warehouse on 5 November, up from a three-year low of $5,900/t at the start of September — European prices began to fall, and were last assessed by Argus at $6,000-6,200/t yesterday.

Chinese export prices then followed suit, shedding over half the gains made in the wake of the auction. Export prices for grade II metal fell to $5,800/t fob yesterday after rising to $6,150/t from a three-year low of $5,600/t.

Market expectations of European prices reaching $6,500/t by the end of this year have been replaced by expectations of prices moving below the critical threshold of $6,000/t, with a scarcity of demand widely cited as the reason. "Where are the buyers?" one market participant asked recently. Trioxide and grade II prices were assessed at $6,000-6,200/t in Europe yesterday, down by $10/t and grade II Chinese export prices were at $5,700-5,900/t fob.

Buyer behaviour

A change in buyer behaviour has made it increasingly difficult to estimate how much of this missing demand is delayed or fully dissipated, and therefore whether prices are likely to fall much further or soon stabilise.

Inventories have been cut back to minimal levels across the supply chain. Buyers are tending to come back into the market on an upturn in prices or fears of tighter supply before quickly exiting, leaving prices to fall back near to or even below where they were before.

Looking at demand fundamentals for antimony, some market participants point to the weakness of the automotive sector, probably the largest consumer of antimony trioxide for flame retardants. Production of flame retardants for plastics and fabrics, among others, is by far the largest consumer of antimony metal at almost 60pc. Car sales in China, the world's largest producer, have fallen for 14 consecutive months. Sales of internal combustion vehicles fell by 2mn in January-June, which was not offset by the over 60pc rise in sales of alternative vehicles to 260,000 following the cutting of subsidies. Global car sales are also weaker. Antimony demand from the lead-acid battery sector has been more stable and appears less affected by the global manufacturing slowdown then flame retardants, at least in Europe. But it represents a much smaller share of consumption at under 7pc.

Temporary demand factors are also at work. Metal stocks are typically sold towards the end of the year, particularly in China to generate cash and reduce book values. The easy availability of supply also provides no incentive to stock material unless and until prices are expected to rise. The point at which inventories have to be replenished to support production is also unknown. US buyers stockpiled antimony ahead of the imposition of tariffs on Chinese exports of a large number of non-ferrous metals in September 2018. Antimony was ultimately excluded from the tariffs because of its strategic importance but this could be another changing factor for demand.

Chinese metal production rose by 23pc in January-October year on year to 72,531t. The biggest increase was in Hunnan province, where output rose by 40pc to 58,253t after producers restarted following mandatory environmental upgrades. Higher antimony production last year by Russian gold producer Polyus is also a possible factor for higher supply. China's largest antimony producer Hsikwangshan Twinkling Star suspended output of antimony metal for four weeks starting in mid-November for upgrades. This is likely to support prices in the near term as large trioxide producers will have to buy metal from other suppliers.

By Caroline Messecar

Antimony prices in China, Europe, US