FOCUS: Five factors driving the antimony price decline

Antimony prices in both Chinese and European markets have dropped significantly so far this year due to weak demand and bearish sentiment caused by factors led by rising trade tension between China and the United States, the world’s two largest economies.

Fastmarkets antimony prices Jan-May 2019

Fastmarkets’ European and Chinese antimony prices have fallen by more than 15% and 21% respectively in the year to date. Fastmarkets presents the key factors driving the bearishness in the antimony markets.

1. Renewed trade tensions between China and the US
Most market participants spoken to by Fastmarkets point to uncertainty surrounding global demand as a result of the continued US-China trade war.

Trade tensions between China and the US have escalated this year, with the latter increasing import tariffs to 25% for $200 billion of Chinese goods on May 10. Overall market sentiment in China has deteriorated and the country’s antimony suppliers have sacrificed profits to rapidly offloaded stocks, according to market sources.

Antimony has so far been excluded from the final list of products subject to import trade duties. But market participants have voiced concerns that this minor metal could be included in the next round of tariffs after US President Donald Trump threatened in May to place the full 25% tariff on a further $325 billion of Chinese goods.

“The threat of new duties is real and it can happen at any time since negotiations are not going well,” a US trader said.

Last year, large cargoes of antimony were shipped into the US ahead of possible tariffs that in the end never happened. This has caused an oversupply of antimony in the US market which is still being consumed, Fastmarkets reported in November.

“There is still material in the US [from the advance shipments] but at some point it has to be depleted… and it is yet to be seen how tariffs will be absorbed,” the US trader said, adding that US consumers could try to source material from other countries to avoid the 25% duties, which will put more pressure on Chinese exporters.

2. Weaker yuan lowers producers’ breakeven costs
A weakening yuan has meant producers in China have been induced to cut offers amid expectations of lower breakeven costs for them.

The Chinese currency has fallen almost 3% against the dollar since the beginning of May. According to exchange rate website Oanda.com, the yuan was trading at 6.91 to the dollar on Thursday May 30 compared with 6.73 yuan on May 1.

Market participants were hopeful that weakness in the yuan could bolster dollar-denominated exports by offsetting the effect of tariffs on exporters. Moreover, a weaker yuan gives the perception that Chinese sellers now have more scope to cut their offers.

But in the case of antimony, it has precipitated cheap offers but failed to foster sales. This is because consumers and traders expect future price falls and some buyers have decided not to take positions in May, they told Fastmarkets.

“Even if the price [of the yuan] is low, nobody is buying… the depreciation of the yuan does not stimulate buying interest,” a Chinese trader said.

“Why would you buy knowing that is a falling market and that in two weeks’ time you could find it way cheaper? […] it does not make sense,” a US trader said.

3. Cheaper imported ore cuts production costs for Chinese metal
In May, market sources reported large volumes of cheaper antimony ores flowing into China from countries such as Tajikistan and Russia. This prompted Chinese antimony producers to cut their sales prices to offload stocks and generate cash to restock on cheaper ore.

China imported 5,890 tonnes of antimony ore and concentrates from Tajikistan and Russia in April, accounting for 74.2% of total shipments, according to official but unconfirmed data seen by Fastmarkets. This marked an increase of 118% month on month.

“The imported ore price stands at an equivalent of around 31,500-32,000 yuan per tonne now, much cheaper than the domestic ore price,” a second China-based market source said. “The production cost [for antimony ore] in China is usually much higher. And it’s hard for domestic ore producers to maintain normal production when its price falls below 32,000 yuan per tonne.”

In comparison to China, antimony ore production is cheaper in Tajikistan and Russia, a Europe-based market source said in explanation for the lower cost imports.

Meanwhile, some Chinese antimony producers utilizing gold antimony ore mainly from Russia have continually cut their antimony metal prices to entice buyers, adding downward pressure to an already weak market, sources said.

“They do not care about how much profit the antimony sales bring to them as their focus is on the more expensive gold extracted from the ore,” a third Chinese market source said.

However, some Chinese domestic antimony producers have reduced their ore restocking since antimony prices fell below production costs in the past few weeks, market participants said.

4. Ample supply available in China
Abundant supply in China has weighed on the metal’s price too.

The Chinese government’s growing focus on antimony smuggling along the China-Vietnam border had made it increasingly hard to take the material out of China via the illegal channel. This is one factor causing supply to build up and exacerbate oversupply in China, some market sources said.

Other sources have said total stocks are roughly similar to last year but producer inventory has been building slowly due to cautious buying and this has caused Chinese antimony producers to persistently cut their offer prices.

“I think the total volume of stocks [of antimony] is approximately the same as that over the past year, but the problem is that the majority of stocks have been accumulating at suppliers’ plants as a result of consumers’ cautious buying. That’s why suppliers have had to continue to surrender on the price in a bid to offload stocks,” a China-based source said.

“In the past, total stocks were jointly owned by producers, traders and consumers, but now, few traders dare to take cargoes from suppliers, and consumers also tend to keep their stocks at a minimum level,” the source explained. “The majority of stocks [are now] stored at producer plants,” he added.

5. Fanya material weighs on the sentiment 
Uncertainty surrounding the release of inventories from the collapsed Fanya Metals Exchange continues to weigh on China’s minor metals market, including antimony albeit to a lesser extent. There is around 18,6600 tonnes of antimony claimed to be held in Fanya sheds, equal to two months of global supply.

While some participants polled by Fastmarkets downplayed the effect of a stock release any time soon, others see it as additional distress in an already damaged antimony market.

“The large volume of [antimony] stocks held in Fanya will always be a headwind to the metal’s price until the issue is eventually resolved in an appropriate way,” a second China-based market participant said.

Cristina Belda

cristina.belda@fastmarkets.com

Amy Lv

amy.lv@fastmarkets.com

Published

Cristina Belda

Amy Lv

May 30, 2019

14:52 GMT

London, Shanghai