Tantalum Price Spike Could Dent Supply Chains

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"The impact, the real concern, is actually obtaining the metal," said Dennis Zogbi, CEO of Paumanok Publications, which does extensive research on the component industry and the tantalum markets. "It's what that does to the supply chain." Tantalum is rare enough that there aren't alternative suppliers. If a stockpile runs out, that can mean that a set of electronic parts simply doesn't get delivered, rather than the price simply rising.

He said some electronics companies as a rule probably have enough for another year to eighteen months of production. Some have only three months worth.

Cornado Hinojosa, senior vice president of the tantalum business group at KEMET, one of the largest makers of capacitors using the material. He declined to say what the company was doing to secure supply. AVX and Vishay, two other major producers, did not respond to requests for comment.

The reason for the looming shortage, in part, that one of the major producers of tantalum got out of the business in 2008, and there's no indication it plans to return. Talison runs a mine in Wodgina, in West Australia, and says it will resume production when global demand picks up. One reason the company left the business was a price collapse in commodities generally, which affected tantalum as well.

World supplies were 2,430 metric tons as of 2008, according to estimates from Roskill Information Services, a U.K. consultancy. That same year the U.S. imported 1,290 tons, according to the USGS. Even with a slowdown in demand because of the financial crisis, and new supplies opening in Brazil, there will still be upward price pressure on suppliers, which in turn affects the companies that process tantalum for use in industry.

While some tantalum is recycled, the process can be difficult and is nowhere near as efficient as recycling metals such as steel or aluminum. Add to that the fact that much of it ends up in landfills, as recycling electronic equipment is usually done to extract the gold and precious metals.

There are other countries that have large tantalum deposits. Ethiopia and Saudi Arabia are two, and there has been a small amount out of the Democratic Republic of Congo. But none of them is well-developed. Chinese companies have made inroads into Africa, but the conditions in the Congo make it more a haven for extracting diamonds and other precious metals rather than tantalum. Brazil, Zogbi said, may not be the largest supplier, but it will be far more stable.

Zogbi added there are ways to avert a crisis of supply. One is for companies such as Talison to re-enter the mining business. But that isn't economical to do yet. Zogbi and Gilerman both said the price would likely have to hit $100 per pound to make Talison consider reopening the mine in Australia.

The other is for the U.S. government to open up exploitation of mining tailings from some areas of North Carolina and Alabama. Many of those mines were not for tantalum at all, as it wasn't of any interest when those mines were operating. "There's piles of it out there," Zogbi said. The government has the power to re-open exploitation of the old mines as tantalum is a strategic mineral, he added.