A decision today by China's Yunnan superior court has triggered concerns about a potential auction of metal stocks held by the bankrupt Fanya Metal Exchange, which could weigh on indium prices.
The Yunnan superior court today upheld an earlier decision by the intermediate court in Kunming, which in March handed out fines of 1bn yuan ($150mn) to Fanya and Yn500mn, Yn50mn and Yn5mn to four related companies for illegal fund raising and embezzlement.
The former president of the exchange, Shan Jiuliang, was sentenced to 18 years in prison. The court dismissed appeals from the defendants, including Shan, today.
The Kunming court held two auctions of stocks from Fanya earlier this year, prior to the retrial at the Yunnan superior court.
The first auction for 37.41t of metal, which was bid at Yn1,080/kg on 28 January, failed to attract any buyers. The second auction on 24 April found a buyer for 34.64t at Yn1,080/kg without a 13pc value-added tax.
The Yunnan court's decision indicates that the authorities are likely to hold more auctions of Fanya stocks in the future. Market participants yesterday heard from the China nonferrous metals industry association that the Kunming court would continue to auction stocks. Other details, including dates and volumes, are unknown.
Participants in the indium market are watching for further market developments, with most of them expecting prices to drop further, although spot prices are nearing production costs and supplies of crude indium feedstock have been tight.
Prices for 99.99pc grade metal yesterday fell to Yn1,060-1,100/kg, the lowest level since at least November 2006.
Fanya held around 3,600t of indium before it collapsed in 2016. China's indium production capacity is around 700-1,000 t/yr, which is less than 30pc of the Fanya inventory. Fanya's reported stocks also included 19,228t of bismuth, 26,951t of tungsten APT, 18,661t of antimony and 191t of gallium.
Chinese police launched a criminal investigation into the exchange's operations in December 2015 and arrested exchange owner Shan Jiuliang in June 2016. Authorities have taken control of the exchange's assets, including 70,000t of non-ferrous metals. Market participants have warned that a possible sudden release of these stocks could cause a price collapse in the spot market.
More than 220,000 investors paid an estimated Yn43bn to buy into Fanya's Ri Jin Bao investment fund. These investors have been unable to redeem their funds since April 2015.
