Critical Metals

A lot of attention was focused on conflict minerals sourced from the Democratic Republic of Congo. This attention focused investors on the growth potential in this market. Prices have been growing on strong physical demand, and the reduction of supply from Congo. The outlook for tantalum is strong in 2011.

By Michael Montgomery—Exclusive to Tantalum Investing News

The attention brought to the tantalum market in 2010 came from human rights groups, and the US government passing the “Conflict Minerals Act” as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The hope of the human rights campaigns is that by forcing manufactures to disclose the use of conflict minerals in products the reputation of the manufacture is at stake. With the growing social and environmental consciousness of consumers worldwide, the goal is to provide transparency so that these consumers can choose products that do not fuel these human rights abuses. With the attention brought to the market, investors are seeking reputable mining companies. As a result a strong physical demand has increased the price of the metal.

The effort to create a tracking system and control the situation on the ground, the government of the Democratic Republic of Congo halted all mining operations in the region in September of this year. ITRI, an organization of major tin producers and smelters, has been charged with creating the supply chain tracing system. The system will take some time to implement a system that will fully oversee the sourcing off these minerals from the numerous small mining operations in the region. The bill passed by the US requires this to be completed in a very short time frame, with a start date set for March, 2011.

Shortly after the passing of the bill, Chinese suppliers of the metal, and manufacturers of electronic goods were reported to be searching out all non-Congolese supplies of tantalum. “Someone purchased 75 % of Brazil’s output for $80, this after rejecting material from the conflict zone of the Congo,” reported Metal Bulletin, adding “the customer was China’s Ningxia Non-Ferrous.”

The supply chain for tantalum was already stretched thin before the reduction of supplies coming from Africa. Congolese tantalum represents about 15 percent of the entire market, which is dominated by Brazil and Australia. The reduction in supply from Africa stretches the supply even thinner. Prices have been steadily rising for the metal in demand, stemming from increased demand for high tech electronic goods. The desire for these products is not likely to subside anytime soon, which should drive this market in the future.

“Tantalite ore prices remained fairly constant at $40 per pound from 2007 into 2009, but starting midyear 2009 prices began to increase dramatically. In less than a year, tantalite ore prices more than doubled with the prices for Q1 2011 now coming in at $120 per pound and spot prices expected to touch $150 per pound,” stated Mary Ellen Bauchman, TTi Insights. TTi is an electronics manufacturer; these prices represent what suppliers pay for the materials.

Physical demand will continue as tantalum is irreplaceable in many of the high tech electronic products. The increase in demand from a rapidly urbanizing China alone will grow the consumer electronics market, putting added pressure on already thin tantalum supply. Acer, the world’s second largest PC vendor, expects “PC revenue would grow 10-15 percent next year, driven by growing demand from China and emerging markets,” reported Ken Wills, for Reuters.

The growth of these markets will fuel the price of tantalum in 2011. When coupled with the move away from tantalum sourced in Congo, the outlook for tantalum mining firms is strong. The outlook from tantalum consumers in the US is for dramatic price increases in 2011. Bauchman added, “The DRC “Conflict” region supply will effectively be taken off line on or before 3-31-11 thus reducing the overall available supply by 16% Tantalum demands will continue to increase driven by upside of needed components for wired communications equipment, laptop computers, 4G hand phones and other newer technology electronic components,” she went on to say that, “In the near term these manufacturers will have to replenish their supplies at current market prices of more than 2X their old cost structures resulting in large tantalum capacitor price increases.”

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