IODINE INDUSTRY NEWS, JULY 2012 MID-YEAR UPDATE

July, 2012

 With third quarter iodine prices having been announced by suppliers, this is a good time to review the state of the iodine industry.

 Iodine prices stabilized the first half of 2012, and entering the third quarter, prices are virtually unchanged.  When this quarter ends, iodine will have had its longest period of price stability since 2003 which is remarkable because even during this last recessionary period, iodine prices did increase somewhat. Considering predictions are for iodine prices to remain steady in quarter four of 2012, this will be the first year since the early eighties with no significant price changes in either direction.

 Given this new stability, many of you are very curious about what the future holds in 2013 and beyond.   After recent meetings with our iodine suppliers, we learned this:  Demand is actually increasing in 2012, and is expected to grow through 2014.  This comes as a surprise because it was expected that at 2012’s price level, some products containing iodine would become uncompetitive or alternates with similar properties would replace iodine products.  Instead, even with the expected drop in demand for older applications such as disinfection, consumption in newer applications has increased.  Three big areas of increase are LCD screens, semiconductor manufacturing and X-ray contrast media testing. In addition, some new uses in proprietary applications have further increased demand.

 After explaining about increasing demand, our suppliers addressed the supply side and what is being done to meet higher demand.  IodiTech utilizes primarily Chilean iodine suppliers along with one domestic source.  So, we learned less about the Japanese supply situation, but due to their finite annual capacity and slowly declining volume, Japanese suppliers do not play quite as much of a role in the marketplace as is often thought.  Our suppliers did confirm that Japanese volumes have returned to pre-earthquake and tsunami levels, and that Japan’s pricing continues to be significantly lower than any other country’s pricing. 

 Mostly we can report about Chile, and the four major mining companies.  It appears some additional supply is entering the market, but not much and very slowly.  Of the four major mining companies, only one has success in steadily increasing production.  One company (which IodiTech considers our partner supplier) continues to have production issues due to water restrictions, and this issue will take a few years to resolve. Another major operation is in a declining volume mode.  This major player is also primary owner of the fourth mining company, the new one which has been named “Algorta”.  Algorta continues to be very far behind its schedule date for full and extensive production. Overall, this situation leaves the worldwide supply of iodine in something of a precarious position, especially should any additional environmental disaster occur in either Japan or Chile.

After reviewing demand and supply, we come to the bottom line:  Price.  The current very high prices seem to have satiated the never-ending quest for higher profits that the iodine mining companies have always sought.  Iodine mining and recovery is a very capital intensive operation; it also requires high quantities of variable cost such as labor, energy and water.  While the profitability for iodine companies appears to have doubled in 2011, suppliers very quickly point out that much of this new profit is being plowed back into operations, so as to increase supply.  Still, these price levels have truly helped enhance greatly the overall wealth of Chilean iodine companies

Given these dynamics-high demand, slowly increasing iodine supply from Chile, slightly declining volumes from Japan, and the desire for high profits, IodiTech does not expect to see very much in the way of price decreases through 2014.  We would be somewhat surprised if pricing continues to be totally flat, but nothing short of another dramatic incident is likely to move iodine prices up or down in the next eighteen months.

For IodiTech’s customers, we have developed a very comprehensive and strategic plan for purchasing iodine.  We are the only derivatives company that is utilizing four different iodine sources, with plans to add a fifth in 2013.  We also spend a great deal of time on forecasting, logistics, and order patterns to ensure that we have material on hand, or can manufacture material, for timely delivery.  Although we always focus on low prices, we also can promise better order reliability through the focus on our supply chain.

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