May 31 (Reuters) - Prices of antimony, a strategic metal

used in flame-retardants, batteries and munitions, are rising to

record highs as solar sector demand outstrips supply, causing a

wide deficit with little sign of easing, smelters and analysts

say.

The surge in prices, which industry participants expect to

persist, underscores the West's vulnerability in relying on top

producer China for key minerals and could also force end-users

to find alternatives for some applications.

Antimony ingot in China climbed to a record 127,500 yuan

($17,588.88) per metric ton on May 29, up 56% in 2024, data from

the Shanghai Metals Exchange showed. European prices have also

climbed to a record $21,000 a ton, up 75% this year, Fastmarkets

data showed.

Globally, declining ore grades and depleting mines are

squeezing antimony supply, Chinese investment bank CICC said in

a report.

"The surge has been almost entirely supply driven. It is not

clear when the supply constraints will improve," said CRU

analyst Chetan Soni, citing various supply disruptions in

Myanmar, Oman, Tajikistan and Vietnam.

China, one of the world's top antimony producers and users

for more than a century, accounted for 48% of global antimony

mine production last year, U.S. Geological Survey data showed,

although its reserves fell to 640,000 tons, down from 950,000

tons in 2012.

Antimony supplies from Russia, the world's fifth-largest

producer, have been disrupted by Western sanctions over Moscow's

invasion of Ukraine, producers, traders and analysts said.

Russia accounted for 24% of China's antimony supply last year,

but Chinese customs data shows there were no shipments in March

and April.

A sales manager at Chinese smelter who declined to be

identified said that producers of finished atimony who don't

have their own ore supplies and must procure from elsewhere are

operating at just 25% capacity.

"The problem is there is not sufficient ore", said a sales

manager at a second Chinese smelter.

Increasing demand for arms and ammunition due to wars and

geopolitical tensions is likely to see tightening control and

stockpiling of antimony ore, analysts at China Securities said

in a note.

Christopher Ecclestone, principal and mining strategist at

Hallgarten & Co, said "clandestine" western military buying is

also driving antimony demand. "The supply crisis is not going

away and the military have bottomless pockets," he said.

China Merchants Securities forecasts antimony demand from

the photovoltaic sector, where the metal is used to improve the

performance of solar cells, will increase to 68,000 tons in 2026

from 16,000 tons in 2021, with the sector's share in total

consumption rising to 39% from 11%. It expects the supply gap

will expand to 21,000 tons by 2026 from 8,000 tons last year.

"It's basically difficult to see a quick ramp up in supply,

but the market at the moment probably needs in excess of 10,000

tons of material to cut the deficits," said Nils Backeberg, an

analyst at consultancy Project Blue, who expects prices to be at

$20,000 per ton over the longer term.

"At the current prices, we will see impacts to the demand

market," he said. "There will be substitutions, there will be

alternatives being used, but there will be some time in getting

those alternatives."

Rising antimony prices have pushed the share prices of

Chinese producers including Hunan Gold, Tibet Huayu

Mining and Guangxi Huaxi Non-Ferrous up

between 66% and 95% in 2024.

More supply takes years to reach fruition, though

governments are making efforts to find new sources.

In April, Perpetua Resources Corp ( PPTA ) received a letter

of interest from the U.S. Export-Import Bank for a loan up to

$1.8 billion to develop an antimony and gold mine in Idaho, part

of Washington's efforts to offset China's critical minerals

dominance.

Perpetua's Stibnite mine would be the only U.S. antimony

source and according to the company could meet 35% of U.S.

demand in its first six years. The Department of Defense has

committed nearly $60 million to fund its permitting process,

which has lasted eight years, to boost U.S. production for

bullets and other weaponry.

($1 = 7.2489 Chinese yuan)