Iodine prices have been flat now since January 2012, when the last major increases in iodine prices were ushered in as 2011 contracts ended and January prices renewed at much higher levels. These increases brought contract buyers back to the levels already being paid by non-contract buyers. Despite the flat Chilean iodine prices in 2012, Asian iodine suppliers have increased prices some in that latter half of 2012 year, but they still lag Chilean prices significantly. Looking back, 2002 was the last time yearly prices were this stable.
In spite of that stability, it isn’t easy to ignore that iodine prices are currently more than twice what they were in January, 2011, and the long term impact of such significant increases remains to be seen. Although iodine does not have a direct substitute in areas such as nutrition, contrast media testing, pharmaceuticals and similar applications, other areas could migrate to substitutes and alternates because of high prices.
The high prices in 2012 were still preferable to the spotty availability of iodine in 2011, and supply is noticeably greater now than at any point in 2011. Two things are responsible for this: A drop in the demand for iodine in markets where substitutes were available, along with limited new production from two sources: A new mine in Chile and from increased output from an existing Chilean mining company. However, these two increases were somewhat offset by decreases at other mines in Chile and continually dwindling Japanese volumes. In addition, a number of new, small capacity mines in Chile have come online since the Japanese crisis in 2011, but with increases evened out by decreases, the high prices have held thus far.
With those high prices in place at the end of 2012, and inventory in a fragile supply and demand state, what do we know as we move into 2013?
One thing about 2013 is already known: Prices will not be going up in first quarter 2013. Suppliers provided prices for first quarter as early as October, and those prices are basically the same as in fourth quarter 2012.
Another thing is known about 2013: Supply and demand, at current prices, is balanced. A decrease in iodine prices would lower supply because most of those small capacity Chilean mines operate at breakeven within the current price structure. Even a small price decrease would remove some supply coming from small mines; a large decrease would probably shut them all down. This would immediately throw the market out of balance, and it would take time to see if the other larger mines would be in a position to supply that lost capacity. Since none of the larger mines seem to have extra iodine to sell, it would appear that no decrease in iodine price is likely unless production increases. And right now, production basically just covers purchases being made by iodine users.
The final thing we know about 2013 is that any drop in the global demand for iodine will have an immediate impact on inventories of iodine at the mining companies. Mining companies would quickly know that one or more applications of iodine were going down in use, because warehouse inventory which have been virtually non-existent since mid-2011 would start to rise. A drop in demand could come from a global economic slowdown, or from an application that has significant decrease in use such as contrast media tests or drop in the use of povidone-iodine liquid. In general, however, iodine use is spread over literally hundreds, if not thousands of applications, so it is typically a global slowdown that impacts iodine inventories (or as in the case of the Japanese earthquake, a natural disaster). If iodine inventories build, it will be up to the mining companies to either slow up on production, or start lowering prices to try and drive demand. Lowering prices rarely helps drive demand however, given iodine’s very unique applications and use primarily as a component in other raw materials.
And finally, the general thought is that new applications for iodine are coming in the near future, so even if demand drops from traditional uses, these new uses will blunt the impact of a drop in use and keep supply and demand balanced for the long term.