Caution urged amid rising fluorspar prices

After several years of low contract prices, 2018 looks set to see acidspar contracts move up while the first deals are settled in Europe well above $300 per tonne.

"There is an important inversion of the trend taking place," a buyer told Industrial Minerals before adding that all offers he had received to date were well above $300 per tonne.

A reduction in global output, from China in particular recently, combined with a rise in demand from fluorspar’s downstream markets has led to the increase in prices, buyers and sellers agreed.

While many had anticipated an increase after negotiations began at the Industrial Minerals Fluorspar conference in Amsterdam at the end of October, some have been surprised at the level of increases while more deals near completion.

"It’s a definite sharp increase from where we are this year. I did anticipate it, but not this much," a second buyer said, adding that one Chinese supplier had told him he wouldn't have anything available until mid-2018.

For further information on price increases seen in the market this week please click here.

But sellers looking to make-up for years of declines should exercise caution before driving prices too high or selling too much product to particular regions, the first buyer and a producer told Industrial Minerals.

Global fluorspar production has been in decline for several years (see Figure 1) and this combined with unexpected production cuts from China in 2017 has led to a much tighter supply scenario.

While the output reduction of fluorspar and its downstream products such as hydrofluoric acid (HF) and aluminium fluoride (AlF

"If I fall into the temptation to sell everything to China others could too and I will have no raw materials," the first fluorspar buyer said, adding, "traders, the new comers, should consider this. When the market goes up everyone goes a bit crazy."

HF and AlF₃ prices have increased in recent months, however, margins will be eroded by increasing fluorspar prices, the buyer added.

How long the anti-pollution-related production cuts will last in China is the key determining factor going forward, buyers and sellers agreed. 

Output is unlikely to increase between now and the Chinese New Year in February, the majority of market participants polled by Industrial Minerals said. 

Production traditionally dips in the run up to national holiday because weather conditions worsen and workers take time off, a trader in China pointed out. 

"While the long winter lasts, fluorspar production may stop in middle or late January before the Spring Festival in February comes, because usually factories will be closed for holidays and workers will travel back to their hometowns in advance, sometimes one month ahead of the festival. Therefore, production may stop for over a month in China, then demand will surely outstrip supply," the trader in south China said.

What will happen after the public holiday has the market divided, however, with some suggesting prices will go down from February onwards while others believe prices will remain above $300 now that the "psychological barrier has been broken".

Negotiations will run into December this year while buyers are in a position to hold back from settling contracts just yet, in the hope of gleaning further market direction.