Geological & Mining Watch ▏Fluorite Prices Have Risen!
Geological and Mining Perspective
The first quarter is traditionally the off-season for fluorite, but this year that pattern has been broken, and a wave of price increases has kicked in ahead of schedule. Various signs indicate that, with the recovery of downstream fluorochemical industries and the growing demand for new energy sources, fluorite is poised to enjoy a stellar performance this year.
This year, the price increase started high and came early.
According to data from Business Society, on March 28, the average domestic fluorite price reached 3,037.5 yuan per ton, representing an increase of 2.32%. On Friday, March 25, and on March 27, fluorite prices rose by 0.42% and 0.21%, respectively.
Investors who have been following the fluorchemical industry for a long time all know that... This year, domestic fluorite has shown the characteristics of a high starting price and an early peak period.
From the perspective of price increase timing, the first quarter of each year traditionally marks the off-season for fluorite. However, as we move into the second quarter, with the growing demand for downstream refrigerants, fluorite prices typically begin to rebound. Taking 2022 as an example, last year fluorite performed weakly during the traditional off-season. But by the second quarter, driven by rising demand for downstream refrigerants, most fluorite companies generally started tentatively raising prices from late April onward.
Starting from the price increase’s initial point, as downstream fluorine chemical enterprises have relatively low procurement volumes, the first quarter of each year typically marks the lowest point in fluorite prices. Last March, domestic fluorite prices once dropped to between 2,400 and 2,500 yuan per ton. After several months of gradual price increases, it wasn’t until October last year that prices finally broke through the 3,000-yuan-per-ton mark.
Unlike in the past, fluorite seems to be enjoying a favorable market situation in 2023. Even during the traditionally slow first quarter, domestic fluorite prices began a three-consecutive-month rise. Moreover, prior to this price hike, fluorite had already reached a high of 2,950 yuan per ton. Thus, just as fluorite prices started to climb this year, they’ve already broken through the 3,000-yuan-per-ton mark.
Refrigerants are an important downstream product of fluorite. From 2020 to 2022, due to the intense competition over quotas for third-generation refrigerants, the industry’s reality became “producing one ton results in a loss of one ton, and each loss lasts for three years.” Take R32 as an example: during the quota scramble, its price plummeted dramatically, directly impacting the overall performance of related listed companies.
For example, Juhua Shares’ net profit in 2019 was 899 million yuan, but dropped to 95 million yuan in 2020. Sanmei Shares’ net profit was 646 million yuan in 2019, falling to 222 million yuan in 2020. Yonghe Shares’ net profit was 139 million yuan in 2019, declining to 102 million yuan in 2020. For more detailed coverage, please refer to the Securities Times·eCompany’s previous special report titled “Quota Dispute Settled—Fluorine Chemical Industry Landscape Expected to Be Reshaped.”
However, after entering 2023, as the competition for quotas for third-generation refrigerants came to an end, these refrigerants—which had been in a prolonged slump—began to see their value return.
A reporter from E-Company noted that, following the Lunar New Year, third-generation refrigerants have broken with the usual off-season pattern and entered a price-increase phase. From February 9 to 13, the mainstream third-generation refrigerant R32 posted a “three-day consecutive rise,” with its price climbing from 13,500 yuan per ton to 14,250 yuan per ton—a price increase of 5%.
Now, as the peak demand season for the second quarter kicks off, the industry has reached a consensus that refrigerant prices are set to return to their rightful value. Accordingly, it’s not hard to understand why fluorite prices have also begun to rise earlier this year.
Overall demand is steadily growing.
Fluorite, also known as "fluorspar," is a rare resource akin to "rare earths" and is classified as a strategic mineral in China. The primary downstream product of fluorite is hydrofluoric acid, which serves as a fundamental chemical feedstock for the fluorochemical industry. Thus, fluorite also marks the starting point of the fluorochemical industry chain.
Data show that China’s reserves of fluorite account for approximately 15% of the world’s total reserves. In 2021, China’s production reached 4.5 million tons, representing 57.1% of global output and placing it in a prominent position within the global fluorite industry. Among these companies, Jinshi Resources is the largest domestic producer of fluorite, with reserves totaling 27 million tons; Yonghe Shares has confirmed fluorite reserves amounting to 3.29 million tons of ore; and Zhongxin Fluoromaterials holds reserves of roughly over 600,000 tons.
In recent years, why hasn't fluorite experienced the same sharp price increases as other resource commodities? This is largely due to the current structure of downstream demand. At present, the primary demand for fluorite still comes from traditional sectors such as refrigerants, accounting for roughly 50% of total fluorite demand. In previous years, the fierce competition among downstream fluorochemical companies over negative profit quotas naturally spilled over into the upstream fluorite industry.
In March of this year, the national fluorite industry held its 2022 annual conference, during which detailed presentations were made on several key aspects, including China's apparent consumption of fluorite, demand for fluorite powder driven by hydrofluoric acid and aluminum fluoride, fluorite import and export trends, output of downstream fluorochemical products, as well as the current status and outlook of the fluorite industry.
It is understood that the main challenges currently facing fluorite enterprises include: an ever-decreasing number of newly discovered and developed mines, increasing difficulty in prospecting, a clear trend of resource depletion in older mines, and lower ore grades being mined. In terms of production, although new production lines are being launched across various regions, most of these are either upgrades and expansions of existing mine facilities or purely focused on processing purchased raw ore. As a result, industry companies’ inventories of both raw materials and finished products have reached historically low levels. Influenced by multiple factors, production costs continue to rise, while the utilization of associated minerals and resources is on the increase. On the policy front, government regulation has become stricter, making it more difficult to renew and obtain mining permits. Meanwhile, state-owned enterprises are showing growing interest in entering the fluorite industry. Nevertheless, overall market demand for fluorite remains steadily increasing, and over the next three to five years, supply and demand for fluorite are expected to remain in a tight balance.
The meeting also pointed out that fluorite is a key mineral for manufacturing next-generation chips and has extensive applications in industries such as defense chemicals, new energy, emerging information technologies, new pharmaceuticals, and energy conservation and environmental protection. At the current level of technology, fluorite—used in fields including fluorochemicals, steelmaking, electrolytic aluminum production, and building materials—is difficult to replace.
