Ta, Nb market weighs up potential for more upheaval

The tantalum and niobium markets are braced for the possibility of more months of Covid-19 related disruptions as they rebalance and adjust to the "new normal", delegates heard at yesterday's 61st General Assembly for the Tantalum-Niobium International Study Center (TIC).

The most pressing concern for many market participants is now one of "inventory juggling" after supply tightness triggered a rush of purchasing heading into the third quarter, which might disrupt activity until the end of 2020, Hong Kong-based Refractory Metals Mining's director, John Crawley, said. "I wouldn't be surprised if the fourth quarter is a bit hurt because of over-inventory build-up in the third quarter that now needs to be worked through," he said.

Other delegates agreed, arguing that the market overheated earlier in the year — potentially becoming detached from underlying fundamentals — and it will take some time to adjust. European min 99.8pc tantalum prices rose to a 2020 high of around $277.50/lb du Rotterdam from 23 April-24 June but have since softened, ending last week at $265-275/lb. European prices for tantalite basis 25pc Ta205 peaked this year at $65-67/lb cif main port from 26 May-8 June, but have since fallen sharply, and were assessed by Argus at $52-55/lb cif main port on 6 October.

Niobium (columbite) concentrate has followed the same trend with a slight lag, with prices for min 50pc Nb205 material falling to $9.20-9.80/lb cif main port last week from a 2020 high of around $11.40/lb during most of July.

Tantalum production recovered in the third quarter — albeit transportation routes for exports from Africa will still be vulnerable to any lockdown-related disruptions and the associated cost inflation. Global tantalum concentrate output was down by around 70-80pc in the second quarter compared with a year earlier, although this followed a first quarter of steady production but reduced Chinese demand, Crawley said. But production recovered in the third quarter, meaning that January-September tantalum concentrate output is likely to have been similar to a year earlier, albeit 2019 volumes were fairly modest.

Market participants are now focusing most of their concerns on other aspects of the supply chain, with some wary that it will take at least another year before the pandemic is brought under control. The factors shaping the tantalite market outlook are "mostly external", Halcyon Trading director Dharam Kotecha said, emphasising the need for some transparency about the downstream demand sector, where the impact of Covid-19 has been extremely mixed.

One major end-user — the commercial aerospace industry — has been severely damaged by Covid-19, reducing the need for tantalum and niobium in the construction and maintenance of aircraft components. It will take some time over the next couple of years for inventory levels to rebalance in line with these reduced aircraft production rates, US-based Aerodynamic Advisory's senior associate, Glenn McDonald, said, adding that the aerospace sector has spent the past few years focusing on using new technologies and materials but the next chapter will be all about costs and "keeping the supply chain intact as much as possible".

In contrast, the electronics sector — another major end-user — has boomed as the global shift toward home-working and educating boosted demand for devices such as laptops and tablets, for which tantalum capacitors are critical components. The questions now facing many in the electronics sector are whether demand for their products has peaked for the time being and how the demand profile will change in the longer term, potentially shifting away from laptops and tablets and toward areas such as automotive electronics, data storage and the advent of 5G communication networks, US manufacturer Kemet Electronics' senior vice-president, Travis Ashburn, said.

Delegates also issued some stark warnings about the need to protect testing and certification processes during the pandemic. Confidence in robust due diligence and tracing procedures is particularly important for the so-called ‘conflict minerals', and can only be ensured by maintaining sufficient funding and people on the ground, metal industry non-profit association ITSCI's programme manager, Roper Cleland, said, warning that the global supply chain will be severely impacted if visibility worsens and trust in these processes is compromised. Crawley warned that if the market were to lose trust in these tracing processes, it could spell a return to hard rock mining, which would be insufficient to supply the global industry.

On the laboratory side, assay results needed for market participants to fulfil contracts have been delayed this year, as lockdown restrictions made it difficult to transport samples and some laboratories were forced to close temporarily, senior client liaison manager at assayer Alfred H Knight, Paul Chew, said. Lessons have been learned from the pandemic's first wave, with measures now in place to send samples to other laboratories — potentially in China — if needed during subsequent waves and lockdowns, although this would still depend on the availability of courier companies.

It also remains to be seen whether tighter US restrictions might have an impact. The US Department of Defense (DoD) issued an interim ruling in late September requiring DoD contractors to stop supplying tantalum oxides, metals and alloys originally sourced in certain countries, including China and Russia, a move that would have a ripple effect on the global supply picture and is already generating uncertainty within the wider market.

Meanwhile, for those involved on the scrap side of the tantalum and niobium supply chain, cash flow is an acute concern. Many of these companies are sitting on high inventories, meaning they are particularly heavily leveraged and vulnerable as customers further down the chain seek to push back payment dates, US firm Exotech's president, David Gussack, said. The result for some scrap recyclers has been a significant drop in capital expenditure, as they put investment on hold to protect profitability.

By Ellie Saklatvala