Viewpoint: Chinese demand supports germanium prices

China's germanium market will likely maintain its uptrend in 2021 thanks to higher demand from the 5G telecommunication sector, expectations of a supply shortage and rising prices as a result of increasing demand from the infrared technology sector.

Prices for 99.999pc grade metal were assessed at 6,900-7,400 yuan/kg ($1,070-1,150/kg) on 22 December, stable from the beginning of the month but up by 4.4pc from the start of 2020.

Rising infrared, 5G demand

Demand from the infrared sector had been rising for most of last year, driven by increased use of thermometers during the Covid-19 outbreak that started in January. Top producers Yunnan Germanium and Chihong Zinc and Germanium restarted production earlier than planned in February to produce thermometers and related devices.

Yunnan Germanium produced 196,800 pieces of the photovoltaic grade, equivalent to four-inch germanium products, in the first half of 2020, up from 26,700 during the same period in 2019. Output of infrared-grade germanium increased by 30.4pc to 2.79t over the same period.

Demand from the 5G telecommunication sector is expected to rise rapidly this year. China announced new development plans for strategic industries at the end of September last year, aiming to accelerate infrastructure construction for some technology sectors including the 5G network.

The 5G network will require existing and emerging semiconductor materials such as compound semiconductors — microchip wafers made out of two elements that include silicon carbide, gallium nitride and silicon germanium.

There were 690,000 5G cellular base stations in use in China by the end of September 2019 and more than 160mn connected users, according to China's ministry of industry and information technology. There are plans to build 600,000 base stations for the 5G telecommunication network this year.

Supply concerns

China's germanium output is likely to have increased to around 100-110t in 2020 from 80-100t in 2019, according to Argus' projections. Output will likely remain at the 2020 level this year, as the Chinese government's stringent environmental restrictions may curb production ramp-ups or restarts at some producers.

Spot availability may also tighten this year when some producers start to make deliveries of 20t of germanium metal to fulfil commercial stockpiling purchases by the Yunnan provincial government. Yunnan Germanium is supposed to supply 15t, with the remaining 5t to be delivered by Chihong Zinc and Germanium.