EU tantalum prices rebound on higher input costs

Tantalum metal prices in Europe rebounded sharply in late-May and early June on rising raw materials costs, higher freight rates and small signs of a demand recovery from the superalloys sector.

And prices have the potential to remain supported in the near-term by strong supply and demand fundamentals, coupled with bullish sentiment in the global economy, according to market participants.

Argus' assessment for 99.8pc tantalum metal has risen to a two-year high of $275-285/kg duty unpaid in warehouse Rotterdam, its highest since the 3 May 2019 assessment of $270-290/kg.

The price increase came on the back of soaring tantalite ore prices, which also hit over a two-year high in May, because of strong demand from the consumer electronics sector, coupled with tightness in supply from ongoing logistical constraints. Argus prices for tantalite concentrates with 25pc min Ta2O5 content rose steadily to $75-79/lb cif main port in late May, the highest since the 11 February 2019 assessment of $75-80/lb cif main port. Tantalite ore prices began to climb in December 2020 and have risen for six consecutive months since then. On average, prices increased by 30pc in January-May, Argus data show.

The rebound in metal prices has lagged behind the scrap and the raw materials markets because of demand weakness in one of the largest consumer sectors, aerospace, as the global aviation industry came to a standstill during the Covid-19 pandemic, reducing the consumption of tantalum.

Tantalum metal prices had reached a year-to-date low of $247.50/kg in February and stayed at around $250-260/kg through April and May, data shows, amid a lack of buying interest in the spot market. Even at the start of the recent rally, price gains were limited as consumers purchased material from sellers holding stocks bought at lower prices, market participants noted.

There was "overhang" in the market but now offers below $270/kg are unavailable, one trader said last week.

As inventory stocks in Europe began to dwindle and higher ore costs trickled down into the downstream markets, Chinese sellers raised offers into Europe, pushing spot prices higher.

There is "shopping going on" in the market, with shipments from China slightly below $300/kg, one trader said, adding that the metal prices were "undervalued" compared with the feedstock prices and have room to move even higher.

Primary market trails behind scrap

Although the tantalum primary metal market is quickly catching up to scrap, it still lags as the scrap market faces [higher demand following the US Department of Defense (DOD) ruling](DOD) on tantalum use for military applications and reduced supply.

Argus assessed prices for 99.9pc vacuum-melted tantalum scrap rose over a two-year high of $133-142/lb delivered US consumer on 1 June, hitting the highest since $135-142/lb assessed on 30 April 2019. In comparison, tantalum primary metal prices were valued at $124.74-129.27/lb on 4 June.

"Scrap is virtually impossible to get a hold of," one trader said, which has pushed prices higher. It is a "runaway train" and there is uncertainty over how demand develops in line with the Defense Federal Acquisition Regulation (DFARS) 252 ruling, another noted.

The DoD implemented DFARS 252 at the end of September 2020, an interim rule that forbids the use of tantalum metal and alloys originating from countries including China, Iran, North Korea and Russia in military projects.

Some companies responded by switching to using tantalum scrap metal as the product was deemed DFARS compliant and its supply chain less reliant on China. At the same time, less scrap was generated in 2020 because of the pandemic and issues such as a halt in production of the Boeing 737 Max aircraft.

But looking ahead, market participants are uncertain about the potential changes to consumption patterns and supply chain requirements for both tantalum products after demand from the commercial aviation sector returns, which could hinder trading activity.

By Anuradha Ramanathan