In late 2009, the global tantalum market bore little resemblance to that of a year earlier. In mid-2008, tantalum consumption was on a strong growth trend in its principal markets - electronics and aerospace superalloys - which make up around 75% of tantalum consumption. Adequate primary supply was in place to meet the industry's needs, along with substantial quantities of scrap, which is mostly generated during capacitor manufacture.
Things then changed rapidly. In the second half of 2009, the tantalum market faces a period of uncertainty that will, quite possibly, remain until 2012.
Global economic downturn had a very marked effect on the tantalum supply/demand balance. Demand in 2009 will very probably prove to be 40% down on 2008, but Roskill considers it will fully recover by 2012. Whether or not the supply will be in place to meet that demand is another issue entirely.
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, Talison 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 ten years earlier, and the ready availability of low-cost material from Central Africa, did not renew their contracts. Talison ceased mine production, taking about a third of primary supply out of the market, and 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 to the market. 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 USA 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 on-stream, or consumers accept contract prices at a level sufficient for Talison to reopen.
