Chinese fortunes begin to turn for fluorspar and graphite

By Simon Moores, Andrew Miller
Published: Monday, 28 January 2013

Graphite and fluorspar prices are rising for the first time in 20 months as Chinese consumers begin to slowly restock inventories in preparation for an increase in industrial activity this year.

Graphite and fluorspar prices are rising for the first time in 20 months as Chinese consumers begin to slowly restock inventories in preparation for an increase in industrial activity this year.

Fluorspar, both acid and metallurgical grades, is on an upward trend after falling throughout 2012, with prices in China rising by an average of $10 to $30/tonne per month, market sources said.

Acidspar prices hit a low of $300/tonne last year, while metspar fell as low as $230/tonne. There is an expectation that prices will recover strongly during the next six months from some of the lowest levels seen since 2007.

IM Data expects acidspar prices could rise as much as 25%.

A leading flake graphite supplier in China also confirmed that prices were once again on the rise and following a similar pattern to fluorspar, but remained cautious about future demand.

Grades expected to be the most susceptible to price increases are -100 mesh/90% C and +80 mesh/90%C. These increases are not likely to be as strong as fluorspar, but certainly in the region of 10% as steel and refractory producers look to restock ahead of a more active year.

Across the board, 2012 was a very poor year for industrial minerals prices, and certainly the worst since 2009 (see pp.65-66). Demand evaporated as construction and auto manufacturing activity slowed and depressed major markets such as steel refractories (graphite) and aluminium (fluorspar) and consumer products including fridges and air-condition units (fluorspar).

The lack of new builds resulted from a market bereft of confidence in all three major regions - China, Europe and the US. However, renewed hope has come after some of the world’s leading economies announced various initiatives to stimulate GDP, and these are expected to lead to activity and restocking of mineral inventories in early 2013.

Japan is the latest country to announce economic stimulus, with a $224bn package focusing on rebuilding the country after the 2011 earthquake and tsunami, new technology companies and small businesses.

China took action in September 2012 with a $150bn stimulus package and a promise to build 60 new major infrastructure projects. The aim was to underpin China’s 7.5% GDP growth target, and has breathed life back into the domestic economy filtering down to the minerals sector.

The timing was critical for the country’s flagging steel industry - a major consumer of mineral-intensive refractory bricks and linings - which has been over-developed in recent years and struggled to handle over capacity.

At that time, hot rolled coil prices fell to an 18-year low, with mineral prices experiencing a similar downward trend. Iron ore prices - a good proxy for industrial activity - fell to $88/tonne, which is a three-year low, according to the Financial Times.

Graphite has been more resilient than many commodities. Prices for 94%, +80 mesh flake graphite were at $1,400/tonne (CIF) at the start of 2013, and were 30% higher than pre-recession 2008 levels, despite falling from all-time highs of $2,500/tonne in 2011.

Fluorspar has fared less well, with acidspar, 97.5% CaF2, DAP, falling to a low of $300/tonne in December 2012, 35-40% lower than pre-recession 2008 levels.

2012 exports volumes of graphite and fluorspar - two of China’s leading non-metallic mineral products - showed improving trend throughout H2 2012, to reach near parity with 2011 in November.

Natural graphite exports - flake and amorphous - improved from a 67%-drop compared with 2011 levels in June, to just 13% in November. Metallurgical grade fluorspar (metspar) volumes, however, were still 44% behind 2011 levels in November, and have not yet reflected the positive turn for prices.

Recovering to 2011 levels
Export volume difference of natural graphite and metspar: 2012 v 2011

Source: IM Data

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