Options for Fanya indium stocks remain uncertain: MMTA

There are several options for the redistribution of indium stocks held by the now-defunct Fanya Metal Exchange in China, but each pose potential difficulties, delegates heard at the Minor Metals Trade Association (MMTA) conference in Edinburgh.

Uncertainty surrounding the 3,609t of indium that the exchange claimed to hold in warehouses continues more than four years after it collapsed, unable to return capital to its investors.

"Fanya's huge inventory is an anxiety to the whole industry," said Chinese electronic metals producer Zhuzhou Keneng New Material's product director Many Yin.

There are five ways in which the government could offload the material, Yin said. The metal could be added to the national reserve, sold to producers, sold in judicial auction, given to a newly-established company in a debt-for-equity arrangement, or returned to investors.

The government initially opted for a court-ordered auction. An intermediate court in Kunming, where Fanya was headquartered, held an auction in January for two lots of indium totalling 34.64t, at a starting price of 1,200 yuan/kg ($175/kg).

But the auction failed to attract any bids and prices for 99.99pc grade indium on the Chinese spot market have since fallen to Yn1,250-1,300/kg ex-works, from Yn1,460-1,510/kg ex-works at the start of January. Chinese export prices have fallen to $185-195/kg from $210-220/kg over the same period.

The government has not confirmed reports of a second auction before the end of this month for 35t at a starting price 30pc below the first auction, which would indicate a price of Yn840/kg ($125/kg).

But the indium market is oversupplied, and the auction is unlikely to attract buyers in need of material. The global indium market has been in surplus in all but one of the last seven years since Fanya launched, Yin said.

When Fanya was operational, listed prices were at a premium to the spot market and producers sold large quantities of their output to the exchange. That halted almost all Chinese indium exports and production increased outside China to make up the shortfall. The resumption of exports following the closure of the exchange in 2015 has kept the global market in surplus.

And concerns about the quality of the metal stocks are a further deterrent and make it unlikely Chinese producers will take the material, Yin said. The metal was claimed to be minimum 99.995pc purity, but "because the auction is held by the government, they are not familiar with the quality," Yin said.

The brands of indium listed at the exchange include Yunhao, Zhongdu, Yumihe, Honghu, Debang, and Yinggeer. "We know who some of the producers are of the brands but not all," Yin said. And questions surrounding the real volume of metal in various Fanya-approved warehouses adds further uncertainty. There have been visits to inspect volumes at some warehouses, but "no one can confirm the total quantity," Yin said.

The failure of Fanya's financial products and the fall in indium prices make it unlikely a new company would be successful with a debt-for-equity swap. And given that Fanya had thousands of individual investors, returning physical metal to them would not be viable, Yin said.

Fanya's indium stocks were the largest as a proportion of annual global production out of 72,000t of 10 minor metals held in its warehouses. The warehouses were also reported to hold more than two years of annual bismuth production and several months of antimony, gallium and germanium output. More than Yn41bn was invested in metal warrants held at the exchange.