It was another interesting year for the iodine industry regarding price, supply, and demand. Initial 2013 prices were quoted at the same price as fourth quarter of 2012. Initially it seemed like this was going to be acceptable to buyers, but then large contract buyers begin to put up resistance to paying 2012’s historically high prices, which were based on iodine shortages, when it was clear that shortages themselves were history. By the beginning of February, several suppliers were quoting prices lower than their December 2012 pricing. This price erosion continued through June of this year, and eventually all suppliers lowered prices. The amount of the decrease has depended upon the supplier’s point of view about their inventory levels and desired income, as well as the quality of the iodine. In a new twist to the Chilean iodine market, some material currently being offered by a few Chilean mines is below traditional quality standards, and the sale price reflects this lower quality. This type of material is deemed unacceptable for use in complex products made by some manufacturers. Prices for this lower grade iodine are considerably less expensive and are a real benefit to those companies that can use it.
As the year has progressed, supply and demand have become very stable; perhaps even out of balance in which there is an over supply of iodine. It is difficult to state with certainty that excessive inventory exists, but if additional price decreases occur in the fourth quarter, it would tend to support that concept. The newest mining company in Chile is still not at 100% capacity but is headed in that direction. Other mining companies seem to be producing at full capacity while one older mine that was expected to close has not. Plus all the small mining companies have managed to stay open even as prices have fallen. Most buyers of iodine are being offered all the material they want, and requests for additional needs are not being declined by Chilean suppliers. Some mining companies have fought to keep prices higher, for obvious reasons, but sometimes less obvious ones. In an attempt to rebuild inventories, at least one mining company has purposefully stated they want to limit sales and build up safety stock to levels they carried prior to the Japanese earthquake and tsunami.
Japan continued on in 2013 with the same very steady course with iodine that it has been on for over a decade: Prices substantially lower than Chile, and a declining supply. It will be many years, if ever, before Japan stops being considered an influence in the iodine market. At the same time, not one company with growth plans for their iodine-related products can count on Japan to help them gain that growth. Because of the steady drop in supply, many companies that were using Japanese iodine exclusively ten years ago now have to buy a fair share of their needs from Chile. One thing that buyers can appreciate about Japanese iodine: Extra profits. Most buyers of Japanese iodine mark up or base their iodine products as though they were made with iodine purchased from Chile. This has, in a nutshell, made some large buyers of Japanese iodine literally tens of millions of dollars in extra profits during the iodine crisis. As Chilean prices decline closer to current Japanese prices, this extra profit is substantially less, but with the differential still large, it is still a significant amount of extra profit.
As 2013 ends, the question inevitably comes up: What about next year? Will prices continue to fall and supply continue to grow due to Chile’s output increase? At this point in time, it would be very difficult to answer that question. The newest mining company in Chile is known simply as “Algorta” and throughout 2013 they have moved along in production capacity. At the same time, other Chilean suppliers have added to their output as well, but global iodine demand continues to be strong. Third generation flat screens appear likely to continue to contain some iodides. Medical uses of iodine, including x-ray contrast media, remain strong. And some companies that had minimized their use of iodine and iodine compounds in 2011 and 2012 due to uncertainty of supply, have come back into the market. It is not in the best interest of any Chilean producer for prices to decline further, and most buyers seem to have successfully worked higher prices for iodine into their market places.
Only a crystal ball could tell us what will happen in 2014.