The container seaport of Hong Kong. Photo by EQRoy at Shuttlestock
In the last month the indium market has soared on a supply shortage caused by disruptions to production outside of Chi-na and increased buying in China bringing an end to a long period of relative calm and shaking up the established trade flow structure.
Indium prices on a futures exchange in the country, the Liyang Zhonglianjin e-exchange — part of the same group that also includes the Wuxi Stainless Steel Exchange — increased by just under 20% in the week of April 15.
The subsequent price rally has shattered the equable price conditions that have persisted, with short periods of relative volatility, since the implosion of the Fanya Metal Exchange in 2015.
When the exchange was launched in 2011, it generated extra demand for large quantities of indium in China. The demand was so significant that it prompted a number of smaller producers to enter the market.
When it abruptly ceased purchasing material, a significant price overhang emerged and the market has been mostly calm since 2015.
Over the last month, however, prices in the physical markets in both China and the West have soared, in China by more than a third to bring Fastmarkets most recently assessed indium 99.99%, exw China, yuan/kg price at the time of writing (May 17th) to 2,850-2,985 yuan per kg – more than twice the price at the same point last year.
And barely a month after the price increase on the Zhonglianjin began, prices in the European market were over $300 per kg for the first time since 2018.
Fastmarkets’ European indium price data goes back to 1992. At current levels, the price swing between May and April will be around 25% – the 14th largest month-on-month swing we have ever recorded. The most recent time a price swung by more than that in a single month was in November 2017.
The recent fluctuation comes as indium buyers in Europe and the US found a shortage of material in the Western market, and struggled to find offers from producers in North America, Europe, Korea and Japan, prompting a rush to secure material from China.
The Western market has traded at a discount to domestic Chinese prices since the second half of last year, with non-Chinese sources of indium generally filling non-Chinese demand at more competitive prices than those within the country.
The sudden unavailability from those sources outside China, which Fastmarkets variously heard was down to increased demand in China pulling foreign material in, maintenance work and a lack of raw material, saw Western market participants re-enter the Chinese market and acquire large quantities of material from Chinese producers.
It is a reversal of the recent trend, caused by a fundamental shift in the global indium market, with China accounting for a greater share of indium consumption, and in recent years, with the country’s net export balance reducing significantly.
The rapid expansion of the country’s LCD producing sector, which accounts for the bulk of the world’s indium consumption, via indium tin oxide, has seen it become both the largest indium consumer in the world, as well as the largest producer of the metal.
China has imported at least some 434 tonnes of indium from Singapore since July 2023, according to official figures. During
the same period, 257 tonnes of material was released from bonded warehouses in the country.
Meanwhile, the emergence of the Zhonglianjin e-exchange as a price driver has seen prices in the country supported
over and above the fundamentals, according to some market participants.
And based on the first three months of the year, for which data is available, China’s indium import export balance is
on track to be its second smallest since at least 2015. The only other time when the trade balance was lower was in 2019,
when the China imported 21 tonnes of indium more than it exported.
Speculative activity on the exchange has been cited as the cause of price spikes in the last year and opened the indium
market up to financing and short squeezes emerging from its futures contracts, even while many in the West, and
several representatives of Western companies in China have been unable to access it and remain uncertain about its
mechanisms and function in the wider market.
This has intermittently seen buyers in China struggle to find offers from producers, who have often preferred to sell for a
premium onto the exchange rather than to physical consumers, we hear.
The posited cause behind the major recent price rally varies hugely depending on who one speaks to, but many market
participants look at an uptick in consumption, owing to a burst in demand for screens as well as strength in the ITO,
semiconductor, solar and soldering sectors.
Participants in the market point to a larger quantity of screens being used in Chinese electric vehicles as helping
drives demand for ITO.
Though it is not clear the extent to which this makes up for still relatively restrained demand in the more conventional consumption area – consumer electronics. After a boom period in the first half of the pandemic, as the shift to remote
working prompted many to replace laptops, computers and TVs, this sector has since been relatively restrained.
Samsung –one of the world’s largest display manufacturers – recorded a bleak performance in its display business segment
in the first quarter of this year. Sales were down 44% quarter-on-quarter, and 19% year-on-year. Though many are predicting that a consumer electronics refresh cycle in the coming year will help drive new demand for ITO.
Demand for solder is, as well as for use in heterojunction solar panels is reportedly firm, and several market participants
have pointed to new demand for computer chips generated by the hardware demands of artificial intelligence.
AXT, a leading manufacturer of compound semiconductor wafer substrates with a US base but significant manufacturing
in China, recorded strong performance in its indium phosphide business.
“Our indium phosphide substrates are currently being used for high-speed optical component for artificial intelligence
interconnects and we are working closely with a number of customers building next-generation lasers for us in data center
transceivers,” the company said in its financial results for the first quarter of this year.
The 3,600 tonne elephant in the room
An often-cited reason behind the recently relatively depressed indium pricing environment has been concerns
about a significant supply overhang from the Fanya Metal Exchange stocks, auctioned in 2019 and 2020.
Minor metal titan Vital Materials purchased the reported 3,629 tonnes of indium held by the exchange and said it
would use the material as its surface mine, locking in several years of indium supply for its own manufacturing at relatively
low prices.
This is more than 3 times annual global refinery production, which the United States Geological Survey (USGS) put at 990
tonnes in 2023.
For its part, Vital downplays the prospect of a supply overhand caused by this stockpile, insisting that it will never be
sold on the open market.
By Solomon Cefai
Reporter — Technology and Energy Metals, Fastmarkets
