If I had to pick a metal that would win the “cloak and dagger award,” I’d pick tantalum. Tantalum pricing information remains elusive, held in the hands of a few key producers and buyers (and a few traders). Any data published on tantalum pricing via some sort of formal index comes from some of these traders.
We don’t know if the traders sell “conflict-free” tantalum products or “transshipped conflict material” (which I will come to momentarily), so reading the press on tantalum might lead a buying organization down the wrong path. We take note of a recent story that appeared in Resource Investing News, commenting that, “so far in 2012 tantalum prices have seen significant reductions compared to 2011, with prices ranging between $100 and $120.”
The first half of the article explains the logic behind falling the prices, citing weak demand driven by higher prices in 2011 on the back of demand for conflict-free material (effectively shutting out conflict tantalum) and the natural de-stocking/re-stocking life cycles that create upward price pressure.
So far, so good — but the second part of the article reports some comments made by David Hendersen, president of trading firm Rittenhouse International Resources, identifying a 650,000-pound tantalum surplus this year. In addition, Daniel Perisco, vice president of strategic marketing and business development at Kemet, states in the RIN piece that “high-cost material exists in the supply chain and will take some time to work off because demand is not there.”
Demand Destruction a Big Concern?
Shhh…apparently the big thing “not” to talk about in tantalum circles involves doing or saying anything that may (negatively) impact the demand picture. “Part of the theatre of the ITTC (International Tin and Tantalum Conference) is to never talk about shortages of supply so that the end users will feel there is no issue with designing in tantalum,” said Chris Grove, director of communications at Commerce Resources, a junior tantalum mining firm, in an interview with MetalMiner.
Though the industry may have concerns about “demand destruction,” engineers rely on tantalum for a variety of reasons. A robotic engineer at a medical device manufacturer told us,“I do know that they offer the best performance-to-size ratio, and that they are critical in all of our modern electronics. The alternate options are typically physically larger and/or have lower performance.”
The reality around the tantalum supply situation, according to Grove, is “most tantalum in 2009 and 2010 came from the DRC. Many keep two years’ worth of stockpiles. Capacitor manufacturers, for example, keep on hand two years of materials because they want to maintain their negotiation leverage with the key processors – Cabot Corporation and HC Starck GMBH.” Grove also said, “many end users signed contracts at a premium, even though no real price increase existed.”
Grove believes the soft prices reported in the press relate to the spot market for material that does not comply with Dodd-Frank (e.g. Section 1502-Conflict Minerals). “Compliant material is likely all fully contracted out,” he said.
Grove also backed up his assessment of what has happened to demand and prices by mentioning the flood of new tantalum offers from countries that previously never supplied tantalum — e.g. Sierra Leone, Nigeria and China (China does not mine tantalum in any meaningful quantities, according to 2012 USGS data) — casting further doubt on whether the material currently floating on the spot market represents conflict-free material.
Despite some of the shorter-term ups and downs of the tantalum market, particularly in light of the conflict minerals legislation and a bullwhip effect, others believe the market for tantalum may remain a little tight. Buying organizations considering materials from countries that typically don’t produce tantalum might wish to consider the sage words, “Buyer Beware.”