Iodine consumers lock in contract volumes at above spot prices for first time in two years

By Michael Greenfield, Michael Greenfield
Published: Friday, 30 November 2018

Quarterly contract prices in the iodine contract market have exceeded spot market levels for the first time in almost two years.

The contract iodine price has edged above spot market levels for the first time since January 2017 after consumers accepted offers at $27.50 kg for the first quarter in an undersupplied market.

Iodine prices have steadily risen since August 2017 with global sales exceeding production levels, causing a 28% price rise in both the spot and contract markets between August last year to now.

Fastmarkets IM's contract price for iodine, min 99.5%, delivered to US/Europe, cif Asia, rose to $25.50-27.50 per kg on Thursday November 29, up 50 cents on the high end of the range.

By comparison, the spot market price for iodine, min 99.5%, spot, delivered US/Europe, cif Asia, held firm at $25.50-27 per kg on Thursday.

In August 2017, the contract price was $20.50-21 per kg while the spot market was $19.90-21.

The last time the contract price surpassed the spot price was on January 19, 2017, when the contract price was $20.50-22 per kg compared with $18.50-21 for spot material.

Two market participants reported making offers between $27 and $28 per kg for first-quarter contracts but negotiations are not yet concluded. It is unclear whether iodine consumers are willing to accept prices at that level.

First-quarter contracts have been signed this month at $27.50 by a third market participant, indicating market acceptance at this level for the first three months of 2019.

The higher agreed contract price suggests consumers are worried of further price increases and are looking to lock in volumes before prices climb further. 

Both sellers and producers widely had agreed iodine prices would move toward $30 per kg by the end of 2018. Although this price has not emerged yet, it now looks likely in the second half of 2019.

Market sources point to the likelihood that the iodine market will remain undersupplied even though market-leader SQM is expanding capacity to 14,000 tonnes per year from 11,000 tpy currently.

SQM will use the additional output to replenish inventories which were diminished when the Chile-based producer stepped in to plug the supply gap.

The 27 club

Sellers, notably in India and Europe, have been looking to break the threshold of $27 per kg for spot supply but have been unsuccessful despite testing the market with offers at $27.50 per kg for six weeks.

Consumers have pushed back against these prices – either negotiating to $27 per kg or under, or only accepting small lots of 1-4kg.

The top end of the range has held firm at $27 per kg for two months.

In response to hearing that contracts had been settled at $27.50 one distributor said, "Its been a tough few months for us in the iodine market".

"I very much expect us to get back on track during the first quarter [of 2019]," the distributor added.

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