Black China Blog

Word from within the industry in China is that several of the major aluminium fluoride producers inside the Chinese industry met recently in Jiaozuo City.

On the agenda was how to stop the red ink amid falling export volumes and prices and rising raw materials costs.   Out of the meeting came a decision to reduce output back to 50-60% of capacity, which is fair enough.   But they also agreed amongst themselves to set a floor price of RMB5,300 for the domestic market and USD1,000 FOB for export customers.

Those of you who have been buying ALF3 for a while will remember the bad old days when a Cartel amongst several suppliers, especially certain European ones, made it impossible for us buyers to secure a decent price.   It was always touted as being a Technical Association, but the outcome was the same.

So it is a disappointment to see that the Chinese, who were partly responsible for the collapse of the old cartel by refusing to join, are now using the same technique against their clients.    It is also a shame that they didn’t think to get their heads together two years ago.   If they had, the runaway expansion of capacity since then might have ben avoided.

But what is most disappointing is that at least one of these four suppliers is telling his clients that the price floor has been set by the Government.   Not true.   If your supplier tells you this, ask him for a copy of the Government document.    Better yet, drop him and find a supplier who doesn’t lie to you.

The irony is that the guy who organised the cartel all those years ago is now operating in the Chinese ALF3 industry, and has marketing rights for at least one of the four suppliers who attended the meeting.    I am not suggesting he was responsible for this initiative, but it will be interesting to see whether this initiative succeeds with only 4 suppliers involved.   It seems to me buyers can choose a good second-tier supplier, of which there are a few, or perhaps even take the matter to court and test China’s anti-price fixing laws.   It also opens opportunities for the non-Chinese suppliers to re-visit their clients and see if maybe new sales opportunities have emerged.

By the way, RMB5,300 is roughly US$780.   And that’s for dry material.    But the difference is due to the export duty of 15%.

You decide which C word I was referring to – Cartel? Collusion? Choice?

Comments welcome!

 Editor’s note:  I have been informed that the reason for the price diference between domestic and foreign sales is due to the export duty of 15% which is applicable.   

Aluminium fluoride prices inside China are on their way back down from their heady levels of 2007.   Dry ALF3 can be bought for as low as RMB5,500, a far cry from RMB11,200 that we saw in June last year.   In fact the prices have now managed to get back to 2006 levels.

The recently announced 15% tax on exports of the material is still being negotiated between buyers and sellers.   But sellers are optimistic that the falling price will create some space for the tax to be folded into the pricing without causing too much pain to buyers.

For more information about the ALF3 market in China, please contact blackchina@az-china.com.