Caution urged amid rising fluorspar prices

By Albert Li, IM Staff
Published: Thursday, 14 December 2017

Acidspar prices are increasing after years of declines, while a focus on China could leave the West short, Barbara O’Donovan and Albert Li report.

As 2018 contract negotiations get into full swing, buyers and sellers of acidspar l in Europe have urged caution.

After several years of low contract prices, 2018 looks likely to see acidspar contract values move up with the first deals being settled in Europe at prices 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, particularly from China recently, has combined with a rise in demand from fluorspar’s downstream markets and has led to the increase in prices, buyers and sellers agreed.

While many had expected 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 expect it, but not to this extent," a second buyer said, adding that one Chinese supplier had told him he would not have anything available until mid-2018.

But sellers looking to compensate 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 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 (AlF3) in China has led to higher demand domestically, producers and consumers outside of China have cautioned against committing too much material to the country.

HF and AlF3 prices have increased in recent months, but 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 for the future, buyers and sellers agreed.

Output is unlikely to increase between now and the Chinese New Year in February 2018, according to the majority of market participants polled by Industrial Minerals.

Production traditionally dips in the run-up to the 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 mid or late January, before the Spring Festival in February, because usually factories will be closed for holidays and workers will travel back to their home towns in advance - sometimes one month ahead of the festival. Therefore, production may stop for more than a month in China, [and] then demand will surely outstrip supply," the trader in Southern China said.

Expectations of what will happen after the public holiday divided the market, however, with some suggesting that prices will go down from February onward and others believing that prices will remain above $300 now that the "psychological barrier has been broken".