February 2, 2018 / 1:51 PM / a year ago

MINOR METALS-Germanium surges on Teck force majeure, tight China supply

Feb 2 (Reuters) - Prices of germanium extended their rally in recent weeks, touching fresh multi-year peaks, after major refiner Teck Resources declared partial force majeure and amid persistent concerns about Chinese supply, traders in Europe and U.S. said.

Prices of germanium, which is used in the semiconductor industry, rose in mid-December to their highest since November 2015 due to declining supplies from the world's top supplier China and rising demand from industrial users.

Another form of the element, germanium dioxide GERM-DIOX-LON, was trading in Europe at $1,130 per kg, having nearly doubled since January 2017, when an oversupplied market pushed prices to 11-year lows.

Germanium dioxide, used in specialty glass for wide-angle camera lenses, has surged more than 22 percent in two weeks.

Teck Resources said on Thursday it had declared partial force majeure on sales of germanium from its refinery in Trail, British Columbia, due to equipment issues related to an operating disruption at one of the fuming furnaces this month.

Germanium dioxide supplies were hit particularly hard since Teck is a key supplier, listing on its website three types of germanium dioxide among the grades it supplies.

Teck, which says it is one of the world’s largest integrated germanium producers, did not give a timeline for lifting the force majeure.

"I have been through two other cycles where new demand brought prices higher ... This is the first time lack of supply is causing higher prices," a U.S. based trader said.

"End-users coming back to buy for the first quarter are hit with sticker-shock when they hear the new prices. But, in reality there is nothing on the market to buy," the trader said.

Traders in the United States and Europe also attributed rising prices to an uptick in demand from manufacturers of military equipment and optic fibres.

Prices of germanium in Europe GERM-LON, standing at $1,550 per kg, have more than doubled since January 2017 and have gained 7 percent in the past two weeks.

Germanium metal is used as a semiconductor in transistors and other electronic devices, in optic fibre networks and in infrared night vision systems for military use.

A recent report from Jane's, released by IHS Markit, said global defence spending will grow for the fifth consecutive year in 2018, reaching $1.67 trillion and overtaking the previous post-Cold War record of $1.63 trillion seen in 2010.

China produced more than 70 percent of the 155,000 tonnes of total refined germanium production in 2016, U.S. Geological Survey data showed.

Germanium prices hit a record high $2,000 per kg in 2014, but prices crashed after China's Fanya Metal Exchange was closed in 2015. The offloading of Fanya's germanium stocks started the trend of lower prices, which started to reverse in January 2017. (Reporting Karen Rodrigues; Additional reporting by Eileen Soreng in Bengaluru; Editing by Eric Onstad and Edmund Blair)

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