China’s aluminium fluoride industry – maligned or malignant?

Asia Metals reported today that the Chinese aluminium fluoride industry has some serious symptoms at present.   According to them, HNFC, DFD and Zhaohe are all suffering, with partial or temporary closures of capacity.  (Note, you need a subcription to access the articles.   Contact AZ China if you want more information.)

The Asia Metal story says that HNFC has closed 50% of its capacity, and DFD 33%.   It also claims that Zhaohe has closed completely.   Finally, it alleges that DFD’s JV plant with Chalco has had construction problems, delaying the start-up of the plant.

We know that things have not been wonderful in this industry for at least 3 years.   Following a concerted effort to corner the world market in first 3/4 of the last decade, the industry went on an expansion splurge through 2007 and 2008.   Capacity eventually far outstripped demand, and when the global financial crisis caused the world aluminium industry to cut back, China’s ALF3 producers were stranded.

But the history this year has been somewhat different, at least at first glance.  Domestic ALF3 prices have risen from RMB8300 at the start of this year, to over RMB10,000 now.   Export prices have risen from US$900 in August last year to $1440 in the latest Customs data.

But at the same time, fluorspar prices have risen from RMB2000 in January, to RMB3200 now.

We don’t entirely believe the Asia Metals story.   According to our sources, HNFC closed their Hendong plant 2 weeks ago, but only for maintenance.   Rumours that producers have closed production lines appear to be only partially true, in that many of them have switched production lines over to the manufacture of HF gas, which commands a higher margin and lower production cost.

Our sources also tell us that many in the industry are concerned and disappointed that some players have been resorting to certain tactics to “disorder the market” as one industry insider told us.   Complaints like these have been circulating for at least 2 years, though all corners of the market make the same complaint.

As one industry insider told us “the fluoride industry is a sad industry”.   I suspect they don’t need kicking while they are down.

AZ China is presently completing a major study of the ALF3 industry, on behalf of Metal Bulletin Research.   Please contact MBR if you are interested in obtaining a copy.   It will be released shortly.


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