Blood Tantalum Filling the Supply Void?

April 14th, 2009 · 1 Comment

Tantalum is one of those little known metals that is a vital component of so many products in every day use. Although it is a vital ingredient in alloys for jet engines, turbines, cutting tools, power plants and nuclear reactors, its properties in capacitors brings it into daily contact in our lives. According toProactiveinvestors.com some 55% of tantalum consumption is in electronics. Although per device consumption has been dropping as electronics have become more efficient, the shear number of electronic devices we use every day means tantalum is a vital ingredient in every form of electronic device including cell phones, DVD players, PC’s, Digital cameras, LCD screens and games consoles.

So it is no surprise that recent demand and hence spot prices have dropped for tantalum along with the price of just about everything else, apart from fees for bankruptcy lawyers. As demand for electronics goods have slumped so has the tantalum price. Meanwhile, tantalum stocks with distributors and consumers have risen to the point where the largest tantalum producer Talison Minerals has closed the world’s largest mine at Wodgina in Western Australia until the market improves. According to Talison, Wodgina supplied 30% of the world’s tantalum ore in 2008. Fine we would say, this is no different from aluminum companies closing smelters or steel companies closing blast furnaces. It brings the market back into supply/demand balance.

However, there is one supply issue in the tantalum market that creates an additional concern – the lowest cost (and most unstable) supply source is the Democratic Republic of Congo in West Africa. The DRC is quite rich in tantalum oxide ore or coltan as they call it. But the supply sources are a mix of legal mines and illegal operations run by war lords with forced labor. The problem has become so acute, that tantalum from these sources has been labeled “Blood Tantalum” much as Blood Diamonds from similar murky sources forced DeBeers and others to certify their diamonds as to source. According to the UN, some $750m of illicit tantalum profits have fueled the conflict in eastern DRC in the first half of this decade. The stigma that is becoming attached to all tantalum from the DRC is becoming so profound that market leaders like Cabot Corporation go out of their way to state their policy towards such material not just from the DRC but from Rwanda, Burundi and various other West Africa states. Unfortunately, not all consumers operate to Cabot’s high ethical standards and the material still finds a home in Russia and China where it is being consumed in the electronics we use every day. The chances are your mobile phone, or the laptop or LCD screen you are reading this article on has traces of Blood Tantalum in it.

Meanwhile consumers are watching the price of tantalum with concern. With such a major supply source as Wodgina out of the market it would not take much of a demand pick up to create a shortage. With demand down and stocks in the supply chain sufficient, there is no immediate prospect of a problem, but as demand picks up next year that could change. There is a lot of uncertainty around current delivered prices at present, according to InfoMine.com. Tantalite Ore is at $84/kg ($39/lb) for Tantalite (25/40% basis 30% Ta2O5) CIF Europe but the probability is the price has dropped since last year on poor demand. But it should not be forgotten the price has the ability to spike on sudden demand surges. Back in 2000, the price surged to $240/lb; a situation the struggling electronics sector will not want to see repeated, particularly as it will further encourage sources like the illegal DRC mines to meet the demand.

–Stuart Burns