2017 REVIEW: Environmental scrutiny reshapes China’s minor metals markets

The nationwide campaign against environmental violations in 2017 changed the landscape of Chinese minor metals markets after permanently closing some smaller illegally operated miners, smelters and flotation plants.

Inspection teams from China’s central government co-ordinated with multiple local government agencies in sweeps across 30 provinces and regions, including major minor metals production hubs of Hunan, Guangxi, Yunnan and Guangdong provinces, resulting in suspensions of operations at some antimony, bismuth and gallium smelters in these provinces over the past few months.

Anti-pollution campaigns had a remarkable effect on the antimony market, with around 50% of output cuts in the second quarter pushing antimony prices to a 41-month high of 61,000-62,000 yuan ($10,000-10,164) per tonne on May 8. The last time prices were at that level was on November 25, 2013.

“Many plants with non-compliance environmental protection standard facilities have been dismantled following the scrutiny this year, so production will be centered on large-scaled producers or state-owned smelters in Hunan (50% of China’s total), Guangxi (20%), Yunnan and Guizhou (10% each),” a source familiar with the market told Metal Bulletin.

Hunan province is also a major production hub for bismuth; after the environmental scrutiny, many processors in Chenzhou city in the southeast of the province left the industry.

In future, bismuth production will mainly come from Jinwang Bismuth, Guangdong Vital, Xianyang Yuehua, Grand Sanyuan, the recycling plants of Yongxing Zhongde, Fujia, Yonghe, and several base metals smelters who recycle scrap to process bismuth, including Jinli Gold & Lead, Yuguang Gold & Lead, Yunnan Copper and Jiangxi Copper.

“Base metals smelters are not frequent participants in bismuth spot markets owing to limited output and lower profits compared with base metals, and the [bismuth] market was mostly dominated by the other producers,” a source said. 

Chinese domestic bismuth prices lingered between 63,000-66,000 yuan ($9,526-9,980) and 75,000-77,000 yuan per tonne in 2017, higher than the ranges of 54,000-55,500 yuan and 70,000-76,000 yuan in 2016, which mainly reflected the inspection-enforced production cuts, but “speculation also played an important role,” a second source reported.

“The [bismuth] market has been recovering since the second half 2016 but demand was also restricted following shutdowns among downstream consumers after the inspections. Rumors that several major producers will stock the material have been circulating in the market for several months… that is the main driver behind price rises in recent months,” the second source added.

The gallium market also saw production cuts in 2017, with the number of active producers halving from earlier levels.

“There were nine operating producers this March but six in October; much earlier, there were around 13 gallium smelters in China,” Xiong Tian, sales director at Beijing Jiya Semiconductor, told Metal Bulletin.

“The average operation rate in the gallium market was around 60% over the past 10 months as several producers stopped [output] because of below-cost prices or environmental inspections,” a second source said.

Low operation rates helped China’s gallium prices remain over 800 yuan per kg for most of the first 11 months of this year after they bottomed out early in May; several major producers halted production for around nine months from the second quarter of 2016.

“The vast majority of producers in the market have been profitable this year, much better than last year, not only because of supply disruption but also because of a steady increase in demand,” a third source said.

Meanwhile, stricter-than-ever environmental scrutiny meant Chinese silicon metal export prices broke with tradition in 2017.

Usually, Chinese silicon metal export prices start to fall during April-May and came under pressure in the summer when silicon refineries in southern China resume production amid lower hydro-power costs during the rainy season.

But instead of a price drop, Chinese silicon metal export prices rose steadily at the start of July 2017 and hit a multi-year high on September 1 of 2,080-2,130 per tonne compared with $1,420-1,440 per tonne a year earlier.

A delay in the resumption of production following the start of the rainy season was the reason for such an unusual price curve.

Perhaps more important was the environmental scrutiny on silicon production, which led to rising raw materials costs for silicon since the start of 2017 and caused spot supply tightness in the August-September period when refineries in several provinces were forced to shutter operations.

“Now it is quite hard to predict the price because you don’t know when another environmental inspection will take place,” a Chinese trader said.