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Fluorspar's value chain could rebalance

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The supply chain in the fluorine market has been disrupted since the outbreak of the novel coronavirus (2019-nCov) in China. Factories and mines in the country have been slow to restart their operations after the extended Lunar New Year break because employees were told not to return to their workplaces in order to help contain the outbreak.

Limitations on logistics movements were also put in place. Trucks and their drivers could not cross provincial borders, making supply chain logistics particularly difficult. The global market is well supplied, with many non-Chinese consumers reporting to Fastmarkets that they have stocks left over from 2019 because sales did not reach expected levels. This caused one non-Chinese consumer to continue to run his factory at 60-70% of capacity.

Similarly, some factories are not operating at nameplate capacity because of poor pricing and demand in key acidspar end markets, such as fluoropolymers and refrigerants. The limited activity in the fluorspar market, both upstream and downstream, could help rebalance the market.

The border between China and Mongolia is closed, a source told Fastmarkets. “The traffic restrictions in China have been largely lifted and when the traffic gradually returns to normal in the whole country in April, the whole fluoride industrial chain will rise by 5-10% or more,” one Chinese fluorspar producer said.

The supply of downstream companies to their customers will not be affected too much in March since fluorspar consumers have enough stock, but end market prices have begun to rise, a seller source said. The slowing of the logistics supply chain could tighten supply.

Mongolia produces large volumes of fluorspar and the majority of the material makes its way into China to either be consumed or exported. Mongolia exports all of its fluorspar, which in 2018 totaled around 550,000 tonnes. More than 350,000 tonnes of this went to China, with the remainder going to Russia, according to data from Mongolia’s Ministry of Mining.

Global fluorspar supply is just shy of 6 million tonnes, according to industry consultant Roskill. The global fluorspar market has also been impacted by weaker demand for fluorine-derived products.

In the latest round of contract talks, consumers were able to negotiate prices down against last year’s contract prices.

Fastmarkets’ price assessment for fluorspar, acidspar, 97% CaF2, wet filtercake, fob Durban, was $350-410 per tonne on Thursday January 30, down from $400-450 per tonne in the previous assessment on December 26 and off from $440-490 per tonne in late November. The November price had been largely unchanged for nearly a year, only widening downward by $10 per tonne in March. Year on year, the price has declined by $90 per tonne, or 19.1%, based on the current midpoint of $380 versus the midpoint of $470 on Jan 31, 2019.

The price reduction was due to weak end-market demand and pricing. "The acidspar producers kept prices as high as they could, but the aluminium fluoride [AlF3] prices went very low, so there was a need for an adjustment in the raw material price," an aluminium fluoride producer said. "We have seen a decrease of 20-25% [in the price of fluorspar]. $100 per tonne looks a little too big of a jump, but considering prices were close to $500 per tonne last year, it might be about right," this source added.

Historically, Chinese acidspar had always commanded the highest price because its quality was usually guaranteed and Chinese suppliers had the volume to supply the international market. While it is still the case that Chinese material is the most expensive, the premium which it commands over acidspar from other locations has diminished.

Mexican material was typically cheaper by comparison due to high arsenic content, which made it unsuitable for many consumers due to the increased downtime it causes for the consuming plant.

Fastmarkets price assessment for fluorspar, acidspar, 97% CaF2, wet filtercake, fob China was at $400-450 per tonne on February 20. Fastmarkets assessment for fluorspar, acidspar, 97% CaF2, wet filtercake, fob Tampico was at $380-450 per tonne. The two prices are almost identical.

Prices two years earlier were $480-520 per tonne for Chinese acidspar and $360-380 per tonne for Mexican material, marking a $100-per-tonne differential between the top end of Mexican and the bottom end of Chinese fluorspar. These price movements have brought a convergence of global prices.

Prices for Mexican material have increased because the market was undersupplied last year and the sole producer in Mexico managed to maintain its price level, citing good long-term demand for fluorspar despite the short-term weakness. Chinese acidspar prices have softened after reaching record highs following the environmental inspections, which created tightness in the market.

Should the current situation in China continue, it could further tighten supply. This would place upward pressure on the fob China price. But this might boost the downstream industries that have performed badly in the past 12 months due to oversupply and illegal refrigerant trade, which has hurt many of the refrigerant producers’ sales.

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