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By Harpreet Bhal and Polly Yam
LONDON/HONG KONG Dec 10 (Reuters) - China has bought nearly a quarter of global production of germanium, which is used in fibre optics and semiconductors, in a move that is likely to prop up prices while demand is weak, traders said on Tuesday.
Traders said China's stockpiling is likely to keep a floor under spot prices, which have been steady for the last few weeks at around $1,840/kg, near a 17-year high at $1,860/kg touched last June.
"It might create a temporary shortage in the market, but things are slow in terms of demand at the moment, so it might not have a big impact on the market in the short term," a Europe-based germanium trader said.
"But from next year, prices could move higher if industrial demand improves as the market for germanium is tight"
Traders said China's State Reserve Bureau (SRB) bought 30 tonnes of germanium for 12,090 yuan ($2,000)/kg, paying higher than prices in Shanghai of around 11,400-11,700 yuan.
The material is for delivery in 2014, with Chinese producer Yunnan Germanium to provide the bulk of the tonnage, traders said.
Global germanium production was 128 tonnes in 2012, according to the U.S. Geological Survey. China is the world's largest germanium producer, with output totalling 90 tonnes last year.
The SRB and Yunnan Germanium could not immediately be reached for comment.
Germanium is used as a semiconductor in transistors and other electronic devices and in optic fibre networks and infrared night vision systems.
Sources said that the SRB had also tendered on Dec. 6 to buy 100 tonnes of indium from state-owned companies but was unsuccessful because its bid price was lower than spot prices.
Traders said they expected the SRB to bid again for indium at a higher price in the coming months, in a move that is likely to underpin indium prices.
Indium, used in LCD screens, hit two-year highs in September as investors on a Chinese exchange for the metal built up stocks, hoping a growing world economy will spur sales of consumer electronics.
($1 = 6.0723 Chinese yuan) (Editing by Veronica Brown and xxx)