Tantalum Supply Chain Update:
Paumanok Publications, Inc. and Passive Component Industry Magazine LLC received a letter from Talison Minerals Pty Ltd, of Perth, WA which stated that the Reuter’s report of September 24, 2009; which quoted a Talison spokesperson as saying that they would re-open their wholly owned Wodgina tantalum mine in mid-2010 was INCORRECT. The letter states- “Talison will only return to Tantalum production as and when market demand for its products dictate and that condition is yet to be met.”
Therefore, in this, the October 2009 edition of Passive Component Industry Magazine, we reiterate our concern that there will most probably be a shortfall in tantalum ore supply to the capacitor, super-alloy, metal cutting tool, semiconductor target and wear part markets in 2010.
To support that contention, we have produced the table on this page which compares tantalum ore consumption in 2000 versus projected demand in 2010. The reason why we use the 2000 year is because that was the last time in the supply and demand cycle when there was a shortage of materials (albeit for different reasons).
Based upon research done for this article, we estimate that for the Fiscal Year ending March 2010, that demand for tantalum ore will have declined to 4.2 million pounds (from its peak of more than 6 million pounds for Fiscal Year 2008 (ending March), with the December 2008, and March 2009 quarters showing the most pronounced declines in demand for tantalum in the past 20 years of research on the subject. This unprecedented decline resulted in the shuddering of some key producing tantalum ore sites, and an unexpected slowdown in new prospecting for tantalum and the loss in financing for some key tantalum development projects already underway.
The critical differences in the supply situation for tantalum ore between 2000 and 2010 is the shuddering of the Greenbushes and Wodgina tantalum mines in Australia (both owned by Talison) and the exhaustion of tantalum reserves by the United States Defense Logistics Agency. The loss of Australia as a producer and the loss of the USDLA as a supplier to the supply chain leaves an 1.8 million pound gap in net new material entering the market. The other aspect that is worrisome is that Cabot Corporation’s wholly owned Tanco mine in Canada has been laying off workers and cutting back production from the mine for most of 2009. The following table assumes that tantalum inventory levels in the supply chain have been “somewhat” depleted. It also assumes that there will be increased mining in Africa (including Ethiopia, Nigeria, Rwanda and the Congo), Brazil and Russia for tantalum ore; and the beginning of supply from the Abu Dabbab mine in Egyot, and from the Commerce Resources mine in Canada. We also assume that new tantalum resources that have been discovered in China and in Canada will not have an impact on the market by 2010.
When these factors are taken into account, the conclusion, as shown in the table below, is a 465,000 pound shortfall of tantalum ore for 2010. It is equally important for the reader to understand that this may be a conservative estimate. This is because as the global economy improves and tantalum inventories of ore, powder and wire are depleted, demand will inevitably return to the 6 million pound worldwide demand number, and continue to grow from there. In Paumanok’s study entitled “Tantalum: World Market Outlook: 2008-2013,” one of the primary conclusions was that demand from other industries outside of electronics was becoming more important to the tantalum supply chain. Traditionally, capacitor anodes have accounted for 55% to 60% of total world supply of tantalum ore in any given year. At the peak of demand in March of 2008 it was becoming apparent that other markets- especially superalloys and wear parts were growing at a rate that exceeded industry expectations; especially for applications in light weight structural sub-assemblies, turbine blades for aircraft and windmills and for medical implants such as knee and hip replacements. Ultimately, we expect tantalum ore prices to begin to increase as the shortfall becomes real.
Additional Resources: (1) Tantalum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 1-893211-11-8 (© April 2010) (2) TANTALUM: Global Market Outlook: 2008-2013 ISBN # 0-929717-81-3 (2008)