* Stocks in Fanya exchange total almost one year supply
* Chinese investors bet on rising bismuth prices
* Buildup of ammonium paratungstate stocks spook traders
By Polly Yam and Harpreet Bhal
HONG KONG/LONDON, Jan 28 Investors using an
exchange in southwest China have built up stocks totalling
almost one year's global output of bismuth, driving prices of
the cosmetics and pharmaceuticals material to a 1-1/2 year high.
The clients of the specialist Kunming Fanya Metal Exchange
focus on minor metals also including germanium - used in fibre
optics and semi conductors - or indium, betting that demand and
prices will balloon with world economic recovery.
Traders say the exchange's stocks of bismuth now stand at
6,072.30 tonnes, close to total global output in 2012 of 7,400
The same exchange, which began trading only in 2011, has
built up twice the annual global supply of indium, used in
making liquid crystal displays.
"You can't buy bismuth for less than $9 (a lb) now in China.
The Fanya exchange keep buying up bismuth. A similar thing
happened with indium. The accumulation is having an effect on
prices," an Asia-based bismuth trader said.
China is the world's largest producer of bismuth, the uses
of which range from being an ingredient in mineral makeup
powders to treating stomach upsets. It is also seen as an
environmentally friendlier alternative to lead.
CONCENTRATION OF STOCKS
The Fanya exchange oversees stockpiles that are suited to
longer term investment and says it offers perfect conditions for
common investors to become involved in rare metals. It says on
its website that it has 70,000 members.
This allows it to command higher prices than the spot market
in China and internationally.
In the international market, minor metals are traded over
the counter and sold for cash in exchange for immediate
Bismuth in the spot market stands at $9.00-$9.65 a lb, or
roughly $19,800-$21,300 a tonne, against 162,200-165,000 yuan
($26,800-$27,300) a tonne quoted on the Fanya exchange.BIS-LON
Other strategic metals are also prone to the Fanya effect.
Fanya has accumulated large volumes of ammonium
paratungstate (APT), totalling 6,680 tonnes, in its warehouses.
Traders said that as a result APT, used in tungsten powders
that are in turn needed to manufacture wires, welding
electronics and mining tools, is also vulnerable to a leap in
price should demand improve significantly.
Prices of APT in the spot market are trading at $375-390 per
metric ton unit (MTU), or equivalent to $37.50-$39 a kg. On the
Fanya exchange, APT prices are 240.40 yuan-242 yuan
($39.75-$40.01) a kg.
Traders said the buildup of bismuth stocks in Fanya, being
held as investments on expectations of higher prices, has
restricted availability for industrial consumers, many of whom
are buying hand-to-mouth.
Spot market bismuth prices have gained roughly 30 percent
"The stocks in Fanya have helped the prices since the supply
in the physical market has reduced," a trader at a large bismuth
producer in China said, adding that the current level of stocks
could easily be digested by physical demand if they were sold.
($1 = 6.0480 Chinese yuan)
(Editing by Veronica Brown and Anthony Barker)