Abstract
There are mounting fears in the tantalum market that serious shortages are
looming. Weak demand in consuming industries, particularly capacitors, coupled
with large inventories in the supply chain, has kept tantalum prices low.
Primary output has been slashed and processors are increasingly relying on
stock drawdowns to make up the shortfall. If there is even a modest recovery
in demand for tantalum in the near future, the market faces a difficult period.
A key issue is the continuing supply of low-cost columbite-tantalite (coltan)
mined in Central Africa, mostly illegally, and sold to fund rebel militias.
The major processors will not knowingly buy such material and almost all of it
goes to China. The availability of large and growing quantities of cheap
tantalum, at a time when global demand for consumer electronics is down and
processors are holding substantial raw material stocks, has, however, placed
the conventional tantalum industry under great pressure. Unable to win the
large increase in prices it needed to be economic, the world' s largest primary
producer suspended mining operations in late 2008. It was soon followed by two
others. Within the space of a few months, close to 40% of global primary
tantalum capacity was taken out of the market. There are no guarantees as to
when, or even if, it will be brought back into production.
The market will remain well-supplied for the time being. A key characteristic
of the tantalum industry in recent years has been that supply has nearly
always been greater than demand. As a result, large material inventories have
been built up at most levels of the supply chain, generally as a result of
take or pay contracts set up in the early part of the decade. Those stocks are
not inexhaustible. In addition, the US strategic stockpile has gone for good
and there are questions as how long tin slags can continue to constitute an
important tantalum feedstock.
As has been the case in the past, processors are increasingly turning to scrap
and other forms of secondary tantalum. Their receipts of secondary material
grew by 70% in 2007 and by a further 25% in 2008. The growing use of scrap is
evident in trade data.
The tantalum processing industry is attempting to develop systems to keep
coltan out of the market by providing ways to physically indentify it before
it is processed and becomes untraceable. Some processors are more committed to
this than others, and the system is not yet fully in place, but the industry
in general is facing mounting pressure from capacitor manufacturers and OEMs
to ensure that coltan is not used. It is quite likely that the supply of
coltan to the market will fall sharply over the next year or two. What will
replace it? Production is being expanded in several countries but probably not
by enough to replace coltan. Numerous new tantalum-niobium projects are in the
pipeline and several would be very large producers. The big question is when
they will come on-stream. Of the three mega-projects, one was originally
planned to come into production in 2006, while another has been held up for
over two years by red tape. The third may come into production in 2011.
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