Conflict Minerals Law Changes the Tantalum Supply Landscape

Though I don’t often find myself on the Tantalum-Niobium International Study Center website, as an organization hosting an upcoming webinar on conflict minerals (you can find the link to the registration here), we find ourselves tracking developments within the tantalum, tin, tungsten and gold markets a little more closely these days.

In October, the tantalum industry will gather to hear a variety of speakers on topics ranging from new mining developments and the development of high capacitance powders to what our readers might find of greatest interest —  Ëœtantalum market prospects.’ And based upon certain supply shortages within the rare earth metals industry, we wanted to determine if the conflict minerals legislation within the Frank-Dodd reform had any impact on tantalum supply markets.

The findings will likely not surprise you. Based upon the prospectus for the tantalum market prospects presentation, three of nine tantalum mines shut down following the 2008 global financial crisis along with the world’s largest mine; material shortages ensued, along with a three-fold price increase.

The shortages, according to the authors, came as a direct result of UN and US laws against trading “conflict minerals. In addition, the prospectus’ authors assert:

“High prices for raw materials result in price increases for main tantalum products which in turn lead to demand slowdown for tantalum capacitors (due to strong substitutes being available) and demand slowdown for tantalum super-alloys (alternatives available). Tantalum products for sputtering targets are less sensitive to the evolution of raw material prices.

The paper’s authors also contend that rising prices will spur more tantalum projects coming on stream.

Tantalum Price Trends

Back on January 20, we reported, “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. Per a recent presentation given by the folks at Commerce Resources, the tantalum price in June 2010 was $60.00 per pound in a concentrate ($140.00 per pound for an oxide) and the tantalum price in July 2011 was $150.00 per pound in a concentrate ($250 per pound for an oxide).

So what have rising prices done for new supply coming on stream? No fewer than nine new projects with some production coming on stream this year and more to follow over the coming five years. However, with demand between 6-7 million tons annually, the new production falls short of meeting global demand (we will cover this in a follow-up post).

How valid is the substitution issue?

As we have seen in other industries (e.g. stainless steel), product substitution becomes a strategy to deal with supply shortages, constraints and high prices. We asked some of our tantalum industry contacts how much tantalum product substitution may be occurring right now.

One contact said, “It is very unlikely that much actual substitution is going on, although you will see differing views on this. I would suggest that any OEM does not want anyone to understand just how sensitive their manufacturing process and designs are to substitution for tantalum. It is my opinion that certain manufacturers have actively been trying to downplay their sensitivity to it. Users of tantalum have engaged with the maximum substitution for tantalum in their products generally since the major miner, Global Advanced Metals, shut down production in December 2008, and arguably these OEMs cannot do any more substitution with any hope of maintaining their product status.

In a follow-up post we’ll examine current tantalum sources of supply and new projects coming on-stream.

In the meantime, if your firm buys tin, tungsten, tantalum or gold, you may wish to attend our first Conflict Minerals webinar led by Lawrence Heim of The Elm Consulting Group.

Register for the webinar here!

Even if you can’t attend the webinar, sign up for it to automatically receive a link to the replay.

–Lisa Reisman

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