FOCUS: Fanya auctions give momentum to minor metals prices after years of overhang
Questions about the fate of stocks held by the defunct Fanya Metal Exchange have been a weight on negotiations in many minor metals markets since the bourse collapsed in 2015, and have contributed to the uncertainty that has stifled trade for much of 2019.
Buying appetite in the spot market has weakened, and prices for some minor metals including indium, bismuth and antimony have reached multi-year lows amid hesitant trade and fears over the release of stocks from Fanya.
But the two latest auctions – for tungsten and antimony – have shown that the overhang of Fanya stocks could prove a bigger burden on trading and prices than the release of material itself.
“Fanya is a done deal now, and once that is out of the way the overhang will start to ease,” a tungsten trader in Europe said.
Tungsten auction finds intense competition
On Tuesday September 17, China Molybdenum won the auction for the 28,336 tonnes of ammonium paratungstate (APT) – equivalent to around three months of Chinese output – that had been held by Fanya. The sale has given relief to the market, and some sources have suggested it could be enough to boost prices and improve the sentiment once market activity returns.
The winning $463-million bid followed 135 rounds of bidding, according to official auction results posted on the Alibaba judicial online platform. China Molybdenum’s final bid was 820 million yuan higher than the opening amount.
Fastmarkets assessed the price for tungsten APT 88.5% WO3 min Europe, cif Rotterdam duty-free at $195-205 per mtu on Friday September 20, unchanged since August 23 at its lowest level since February 2017.
The tungsten market has been under pressure since the beginning of the year, in part due to slow consumer buying stemming from the Fanya overhang, with buyers waiting to see who would buy the stock and at what price. But, over the past few weeks, prices have stabilized and even risen in the Chinese domestic market in anticipation of the successful auction and subsequent tightening concentrates supply in China.
“Fanya stocks aside, the rest of the market is tight; stocks are really low,” a second trader in Europe said.
“Customers in Europe will need to buy APT soon,” a third trader said. “When Fanya is out of the way, buyers will come back.”
Antimony prices gather momentum after auction
In the antimony market, too, the auction of Fanya stocks boosted sentiment by providing clarity on the availability and status of material.
Prices found support immediately after China Minmetals won the auction for all of Fanya’s antimony stock – 18,661 tonnes – at the end of August. The final price was $76.28 million, much lower than prevailing spot market prices at the time.
In Europe, Fastmarkets assessed the price of antimony, MMTA standard grade II, in-whs Rotterdam, at $5,800-6,085 per tonne on Wednesday September 18, up by 1.6% from $5,700-6,000 per tonne on September 13, with producers raising their offers on improved sentiment amid restocking. That price widened upward on September 20, to $5,800-6,100 per tonne.
The auction came in a moment in which buyers were expected to restock materials and boost prices in the process. At the time of the auction, on August 31, antimony, MMTA standard grade II, in-whs Rotterdam, stood at $5,700-5,950 per tonne.
“The rise seems artificial because global demand is still slow, but producers are seeing an opportunity to reverse the situation after the Fanya auction… It is hardly possible to find material at a decent price, we could not even buy last week,” a European supplier said.
Given the expectation that Fanya stocks would start to be auctioned this year, buyers had been reluctant to overstock. As a result, they have been working with low inventories, especially in Rotterdam. And now that the antimony auction has concluded, producers have been able to command higher prices from buyers needing promptly available top-ups.
Material in strong hands
In the cases of both antimony and tungsten, market participants expect the former Fanya stocks to remain in China, or at least to remain in strong enough hands that the material will not flood the market.
Certainly in the international market, market sources were confident that the Fanya APT stocks would not find their way into the international market, due to buyer caution over the origin of the stocks, ethical sourcing and related conflict mineral regulations.
In both cases, sources also believed that where Fanya stocks were auctioned in one go, large enterprises took strategic positions that will not be affected by small price fluctuations or by potential pressure to destock and add to market volatility in order to ease cashflow.
That is especially the case in antimony, where the material was bought by a state-owned company.
“[Minmetals] can afford to wait. There is no urgency [to sell], and [this] can balance the market,” a European antimony trader said. The Fanya auction puts antimony metal into fresh hands, but it doesn’t necessarily put buyers in a strong position to obtain aggressively cheap units, he added.
Indium stocks drip-fed out
The latest two auctions have taken a different strategy than that used for indium, which was the first Fanya stock to be sold. Two auctions – totaling 34.64 tonnes of indium – have been launched since January. The first one failed to attract any bidders, while the second was priced below spot market levels at that time.
The amount of indium believed to be in warehouses is 3,594.83 tonnes, representing five to six years’ supply. A volume of that scale is not easy to allocate to a single buyer, and has meant lingering concerns of additional Fanya auctions, resulting in very limited spot demand in recent months.
Fastmarkets assessed the price for indium 99.99%, in-whs Rotterdam, at $150-170 on September 20, unchanged since late August on low spot liquidity. The European indium price is now trading at its lowest since October 2017.
Chinese prices also have fallen by more than 25% since mid-January, when news emerged about the auctioning of indium stock held by Fanya. Fastmarkets assessed price for indium 99.99%, exw China at 1,060-1,090 yuan ($150-154) per tonne on September 18. Back in January, the price stood at 1,450-1,480 yuan per tonne.
“With indium, the quantity is so big and the value is so high that it cannot be sold [in one round],” a US trader said. “For metals such as antimony or APT, the release is a relief; but for others such as indium… five years of supply [on sale] can totally destroy the market,” he added.
“For indium, the problem is how to sell it,” a minor metals trader said. “Who will buy that huge amount and sit on it?… It is not appealing for any company. It is not reasonable. Eventually it has to be acquired by the Chinese government to build strategic reserves.”
In the wake of the four auctions – three of which have been concluded – market sources now have a clear preference in how they hope future sales of Fanya stock will be structured, namely, that all supply is sold at once. Whether that becomes a reality likely depends on the volume of material that is being held.
Even in the case of bismuth, with an estimated two years of global supply in warehouses, some sources expect the same kind of outcome.
“Let’s put that hypothetically bismuth is sold at [a] 10% discount [to the market price]; the total [would] be around $100 million… That is doable for a big company, and it will clean up the market. It has to be done like this, otherwise the market will collapse,” another minor metals supplier said.
Potential auctions for gallium and selenium also would seem to lend themselves to the same style of bidding as antimony and APT. Fanya is believed to hold 197 tonnes – or four to six months’ supply – of the former and 337.8 tonnes – or two months’ supply – of the latter.
“Still, short term, [these auctions] will make some noise, but there is no other possible way to do it,” that minor metals supplier added.
Ewa Manthey in London contributed to this report.[This article was updated on September 25 to correct the table displaying volumes of indium stocks held in Fanya warehouses as of 2015 to 3,629.46 tonnes instead of 3,692.46 tonnes as previously stated.]