More than two years ago, MetalMiner reported that one of the world’s leading tantalum producers, then Talison Minerals (now Global Advanced Metals) closed its operations at Wodgina due to poor demand just after the global economic crisis in late 2008. This past Monday, Global Advanced Metals announced it would re-open the Wodgina mine as well as Greenbushes, its processing operation, to the tune of 700,000 pounds of material. Wodgina has annual capacity of 1.4 million pounds of tantalum pentoxide. The Wodgina operation, according to a press release on the company’s website, represents one third of global supply when fully operational.
Clearly some market dynamics have shifted within the tantalum market.
Try keying in “tantalum prices” into Google and one can find few if any reference prices, though Infomine does have some pricing (though it’s unclear exactly what the pricing covers) or perhaps the old articles we ran back in early 2009 including this one (tantalite ore back in Dec. 2008 had been in the $36-37/lb range) provide additional price points. Reuters published a piece today with European spot pricing (scroll further down). The only other pricing available involves spot pricing from Africa. But spot pricing may no longer provide a viable means of understanding market trends, primarily because that market has dried up, so to speak.
Welcome to the murky world of global tantalum pricing, in which a few world buyers and sellers set prices based upon actual transaction prices.
Sources tell us that historically long-term contract pricing runs higher to the spot price. And that means a concentrate price in the $120/lb range. How does one come up with that figure?
Let’s review tantalum’s forms and a few rules of thumb. Tantalum comes in basically three forms: tantalum ore and concentrate (where our sources tell us long-term pricing could easily exceed $120/lb with African spot prices at $60/lb, though one can’t actually buy African tantalum at that price), tantalum oxide/salts (which essentially double the ore prices) and finally, capacitor-grade tantalum powder, now at approximately $300/lb according to our sources. It’s this last grade that finds its way into the electronics we own.
In 2008 Global Advanced Metals had asked for higher prices to justify production cost increases at their Wodgina mine. Considering mining economics, one can assume the mine achieved its price per pound target based upon what they had sought in 2008, $120/lb.
We speculate their economic break-even point at about $100/lb. The fact they have made this announcement, opening their mining operations suggests to us that tantalum concentrate prices may already be in the $120/lb range. Reuters published this European tantalite (ore) spot market price chart today:
So why the price spike for tantalum?
As a reminder, tantalum is used in cell phones, DVD players, PCs, digital cameras, LCD screens, and game consoles. It is also an essential component for jet turbine blades, nuclear reactors … and the list goes on. On January 1 of this year, the Frank-Dodd financial reform bill went into effect requiring US corporations to “state whether they source ‘conflict minerals’ from both Congo and neighboring countries” and “report on steps taken to exclude conflict sources from their supply chains, backed by independent audits.
Even China has stopped purchasing tantalum on the spot market, because of the conflict minerals legislation. China has historically served as the largest purchaser of this material. It should come as no surprise that Chinese ODMs and contract manufacturers had great concern and interest in keeping their US customers from Apple to Intel to Toyota.
The largest tantalum processor in China, Ningxia Non Ferrous Metals, purchased 91 metric tons of tantalum concentrate from CI Fluminense (Brazil) in July 2010 at $80.00 per pound. At the time, that represented a 30% premium to the existing tantalum price of $60/lb.
Will these new prices stick and will new capacity come on stream? The signs may suggest yes.