The relative stability of indium prices over the past seven years has likely come to an end as the global market has splintered into three distinct regions, delegates heard at the Minor Metals Trade Association's (MMTA) annual conference in Lisbon yesterday.
The liquid crystal display (LCD) panel industry, historically the largest indium consumer, has matured and demand growth at a rate of 0-2 pc/yr will no longer drive the market, said Brian O'Neill, manager of the indium business unit at AIM Products. "It used to be that supply and demand determined the price. I think that's over. Now it's going to be geopolitics and restrictions on free trade."
Indium has tended to trade either side of $225/kg since 2018, but the global market has undergone a fundamental shift since last year. Price ranges outside China have surpassed $400/kg at the high end in recent weeks, Argus assessments show. Chinese export prices spiked in March to approach that level but have since retreated.
"In the last seven years, there was pretty low volatility […] but our placid years are over, and we're going to see more activity on the price front," O'Neill said.
The Covid-19 pandemic accelerated a splintering of the market, with prices diverging between China, the US, and the rest of the world. The reorientation of indium supply chains began as LCD fabrication plants, which were historically located in South Korea and Japan, migrated to China to reduce costs. This resulted in China shifting from the largest exporter to becoming the biggest consumer as well as producer, giving it control over the global market.
Demand spiked during the pandemic for indium tin oxide (ITO) in LCD TVs and computer monitors, pushing up prices internationally as most market participants held low stocks and relied on what had been an efficient supply chain.
The ex-China, ex-US market — led by Europe — maintains free trade and has some primary indium production, while the US market has diverged as it has no primary production and has introduced high import tariffs, O'Neill noted.
The US already had a de facto ban on imports of Chinese indium prior to the introduction of the most recent US-China tariffs, having previously been at a rate of 25pc, followed by an additional 10pc, and another 10pc added this week.
"Consumers found other sources during that time, and so we had a good runway to prepare for the world without China. That's why we haven't seen the price move as much as we would have expected from these tariffs, because the price was already high," O'Neill said.
Trade data indicates that US buyers front-loaded their purchases in the first half of 2024 ahead of the latest tariff rounds. The US imported a total of 248.9t last year, up from 218.8t in 2023 and 201.6 in 2022. China accounted for 68.2t, followed by Japan supplying 61.7t, with the rest largely coming from South Korea, Taiwan and Canada.
But as consumers run down those stocks, there is potential for prices to rise, while the market remains at a discount in China where there is excess supply. "Consumers in the west are supplied fairly well, but it's finally balanced. Any burst in spot buying will probably have an impact on price, because there's not much room for error," O'Neill said.
At the same time, increased volatility in the Chinese market is being driven by a new phase of financialization, with the availability of futures contracts for trading on the Liyang Zhonglianjin exchange.
"China remains the centre of gravity in the indium market as it always has been," O'Neill said, adding that while global supply is known, the impact on demand from the financial exchange and geopolitics are unknown factors.
The downstream markets for indium have been consistent for 15-20 years with ITO in display panels accounting for around 65pc of consumption, solders using 20pc, semiconductors taking 10pc and niche applications covering the remaining 5pc.
Copper indium gallium diselenide (CIGS) solar panels, which had been expected to lift demand, proved to be too difficult to manufacture at scale and unable to compete with Chinese silicon-based panels. The application collapsed after a five-year run. There is growing use of indium phosphide (InP) in artificial intelligence and cloud computing, as well as other thin-film applications that could keep overall demand growing at around a 2-3pc compound annual growth rate.
Positioning will be critical for traders, as they need to have material in all three regions. Indium held in one region may be completely uncompetitive to trade in another region — creating opportunities as well as challenges in trading.
