Tantalum production takes a dive

Tuesday, 20 October, 2009

This year, demand for tantalum, of which some 75% goes into electronics and aerospace, is likely to be 40% lower than 2008, according to a report from Roskill Information Services in London.

However, the forecast is for a full recovery by 2012 but there is a question mark over whether supply will be able to meet demand by that time.

Historically, the larger part of global primary tantalum supply has come from one producer in Australia, Talison, which sold to the major processors under long-term, fixed-price contracts.

In late 2008, the company attempted to renegotiate its contract prices and to increase them significantly, to a level at which it could produce economically.

Its customers, faced with declining downstream demand, large inventories that had their origins nearly 10 years earlier and the ready availability of low-cost material from Central Africa, did not renew their contracts.

The company ceased mine production, taking about a third of primary supply out of the market and it was soon followed by other conventional producers.

A large part of the primary supply chain is not producing in 2009 and there are no clear indications as to when, or if, it will come back. Inventories are running down, scrap is in shorter supply because of a fall in capacitor manufacture and it is quite possible that legislation under consideration in the US could severely restrict or even halt the supply of tantalum from Central Africa.

Several projects are at various stages of development around the world and some could be in production by 2011 or 2012. Combined, their output would solve the tantalum supply question for the foreseeable future and obviate the need to source ‘conflict minerals’.

It is almost certain that a tantalum supply squeeze is approaching. If demand picks up faster than expected, a spike in spot prices seems inevitable.

Stability will probably not return to the market until the new projects come onstream or consumers accept contract prices at a level sufficient for Talison to reopen.