Critical Metals

Rising demand for consumer electronics’ will stretch the supply chain of tantalum thin, potentially eliminating stockpiles of the metal. Tantalum is essential for high tech electronics, and prices having been rising on limited supply. Ron MacDonald from Cansource explains how this will effect the market.

By Michael Montgomery—Exclusive to Tantalum Investing News

The majority of tantalum, over 60 percent, is used for electronic capacitors in high tech electronic goods. From cell phones to laptops the material is vital in making the technology smaller, faster, and more efficient. Consumer electronic goods are seeing a resurgence in demand as the world economy recovers, as well as an increased demand from emerging markets. Demand for computers and smart phones in China and the rest of Asia is exploding due to the rapid urbanization and rising income levels. Changes in the overall landscape of computing and mobile devices, including tablet computers, could cause a large spike in demand because people increasingly rely on multiple devices to manage their daily lives.

Households no longer have one computer that suits their computing needs. With the introduction of tablet PCs, a new dynamic has been created. The future of the digital age will see an increase of consumers that own multiple high tech goods: a PC or notebook for home and work computing, a tablet for on-the-go computing, and a smart phone for truly mobile connectivity. This increase in demand could be substantial and could raise the overall demand for tantalum, a vital  component in the manufacturing of these technologies.

“Worldwide tablet shipments this year are forecast to hit 57.6 million, up from 17.1 million in 2010. Shipments will continue to climb during the next few years,” stated Mike Howard, principal analyst for DRAM & memory at IHS, at the Consumer Electronics Show in Las Vegas.

In China, two new developments will increase the level of sales for electronic goods. The first is the reduction of half import tariffs for electronic goods, currently down to 10 percent from 20 percent. This is significant because currently an Apple iPhone cells for $911 in China. Many of these products are made in China, shipped to Hong Kong, and returned to the mainland with a 20 percent tariff. Any reduction in price will spark huge demand.

Secondly, China is switching over to 3G for cellular phones. As a result, the increased speed on their networks demand for smartphones will undoubtedly explode in urban centers. “The number of 3G users will close in on 120 million in 2011, or roughly 10-15% of the subscriber base,” reports Russell Flannery, for Forbes. The use of tantalum in these new phones and tablets is essential; there are no substitutes.

The demand for tantalum has already strained the supply chain, which has been affected by the passing of the Conflict Minerals Act in the US. Resource Investing News exclusively interviewed Ron MacDonald from Cansource about the market factors affecting supply.

“The market demand is increasingly significantly, because of the recovery in the electronics sector… stockpiles will run out as early as the end of the second or third quarter of this year. Stockpiles will be gone, there is no new production. You will have the former Talison (now Global Advance Metals) coming back with less than half of their former production,” stated Ron MacDonald. The Wodgina and Greenbrushes mines of Global Advanced Metals recently started production on their sites, the story was covered on Tantalum Investing News on January 25.

The shortfalls of supply have occurred because of the increasing demand for tantalum, as well as Chinese firms purchasing large swaths of ethical tantalum from Brazil. “Fluminense [Brazil] signed a big off-take agreement with the Chinese, so that effectively takes all the ethical tantalum out of the market place,” added MacDonald.

Prices for tantalum started to increase significantly after the conflict minerals bill passed in the US. Manufacturing firms started searching for secure supply of the material, that simple doesn’t exist. When asked about how high prices may go this year, Ron MacDonald added that, “the buzz in the industry is that recent contracts have approached $150 per pound in a concentrate, and there is talk that it will go even higher amid concerns of significant shortage developing from the Dodd-Frank Legislation, and OECD and UN regulations.”

In the short term, there is a lack of supply of this critical metal. Many of the mining firms will not be able to produce on their deposits in the within the next two years. The inevitable price increases for the metal will help mining firms secure funding for their projects.



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