Tantalum Supply Chain Update: 2007
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|Dennis Zogbi||February 05, 2007|
The Position of Tantalum in the Electronics Industry:
Tantalum capacitors are critical to the global electronics industry because they offer the design engineer high capacitance in a small case size. When volumetric efficiency requirements limit the available board real estate and the capacitance value exceeds 100 microfarad the choice is typically tantalum. Thus they are critical components in notebook computers, wireless handsets, telecommunications infrastructure equipment; digital video cameras, game consoles, car electronics, medical electronics, and defense electronics. Tantalum capacitors are used for bypass and decoupling and pulse discharge applications in these circuits, but they are used sparingly. In 2006, tantalum capacitor production accounted for only 2.3% of global discrete capacitor production volume. Compared to ceramic capacitors, tantalum is truly niche, but its frequent use in compact electronic systems attests to its importance to the system design as a whole. What’s even more important is that the market has been showing healthy signs of unit growth, especially for ultra-small (P and J) case size tantalum chip capacitors, and conductive polymer versions of the larger (D and E) case size tantalum chips. Tantalum capacitor consumption in 2005 and 2006 was boosted by new design wins for tantalum chip capacitors, especially for applications in digital video circuits, where their stability translates into better video quality for the customer.
Why Tantalum Differs From Other Capacitor Materials:
Tantalum differs from all other capacitors because it gets its unique properties from a rare-earth metal, that has its own symbol on the periodic table (TA). Other capacitors, such as ceramic chip designs, employ more abundant materials (barium carbonate, titanium oxide, nickel, and copper); or aluminum foil; polyester or polypropylene, for example.
The important factor is that the consumption of tantalum in capacitor anodes accounts for more than 50% of global tantalum metal consumption while all other materials consumed in the space consider capacitors as niche when compared to other opportunities (for example, titanium oxide is consumed in paint; nickel is consumed in batteries and steel production; polyester and polypropylene are consumed in packaging and wire and cable); and each of these markets require a much higher volume of materials than capacitors. Therefore, pricing for these raw materials has remained steady, while materials pricing for tantalum have been more readily influenced by changes in the high-tech economy. Thus it is important to watch changes in the tantalum supply chain very closely so that its availability to support tantalum capacitor production is not compromised and its supply remains as seamless as possible.
Tantalum Mines and Other Sources:
Tantalum metal is mined primarily at two mines in Australia, the Greenbushes Mine and The Wodgina Mine, both of which are owned by Sons of Gwalia. These two mines are extremely valuable to the high-tech economy as they are both large enough to support the requirements of the tantalum capacitor industry. However, their output is unparalleled by any other active mine set in the world. There are other tantalum mines, but they have only 10% to 25% of the capacity of either Greenbushes or Wodgina. It is also argued that many of the other mines in the world are located in politically unstable regions or in areas where it is too cold to mine year round. Over the 15 years Paumanok Publications has tracked tantalum supply we have noted that consistent supply of tantalum metal has come from The Wodgina and The Greenbushes Mines in Australia, The Bald Hill Mine in Australia,The Cabot Mine in Lac Du Bonnet, Canada; The Metallurg and Paranapanema Mines in Brazil, and the Kenticha Mine in Ethiopia. Other mines located in the Congo, China, Bolivia and throughout South East Asia have not maintained consistent supply, but rather react to upward changes in demand for the metal. Tantalum is usually found in nature with columbium (That is why it is tantalum is known as Coltan in Africa), niobium (which is also used as a capacitor dielectric), and tin.
Another major vendor to the market place over the past 15 years has been the United States Defense Logistics Agency, which has supplemented global hard rock mining by selling tantalum ores and concentrates into the global market from one of its many warehouses in the United States.
Processing Ore Into Capacitor Powder:
Tantalum ores and concentrates are further processed into capacitor grade tantalum metal powder through a sodium reduction process by Cabot Corporation, HC Starck or Ningxia Non Ferrous Metals Smeltery. Tantalum metal is also consumed in tantalum capacitors in the form of wire for the lead attachment to the powder anode. The value of tantalum ore is almost tripled in the process to convert the ore into capacitor grade powder (as is the price per pound) and the value of the powder is increased ten fold from the value of the powder contained in the anode in the finished capacitor.
The processing required to make powders for use in capacitor anodes is extremely advanced and considered “black art” by many in the industry. This has been a technical barrier for entry into the market for many chemical companies for many years. A close working relationship between the mines, the materials processors and the capacitor manufacturers is required for the consistent supply of increasingly sophisticated materials required to create such high capacitance in increasingly smaller packages.
New Challenges Facing the Tantalum Supply Chain in 2007:
In the first quarter of 2007 I noted some interesting changes affecting the supply chain for tantalum capacitors.
The Sale of HC Starck:
First, in 2007, the market will begin to feel the affects of Bayer AG of Germany selling their H.C. Starck subsidiary to an investment group comprised of Advent International and The Carlyle Group (This closed in 4Q 2006^). H.C. Starck is well positioned in the tantalum sector because of their unique combination of high capacitance tantalum metal powder and their PEDOT line of conductive polymer cathode materials. Now that they have separated from the Bayer AG parent, the company may be free to compete in areas of the anode market where they had not been involved in the past.
The Reorganization of Sons Of Gwalia:
Also in 2006, Sons of Gwalia remained in a state of reorganization, and a sale of the assets of the company, including the valuable Wodgina and Greenbushes Mines is expected in 2007. The ownership of the mine has caused some concern as a new owner may continue to operate the mines as they see fit, and may keep supply at a minimum to increase the price per pound for the ore. SOGs substantial share of the hard rock tantalum ore market makes this a possibility, as their customers would be hard pressed to find alternative sources for the ore.
Changes in the Output of the Greenbushes Tantalum Mine:
The Greenbushes Mine continues to operate at half capacity (about 500,000 pounds of ore) as we enter into 2007. No change is expected in the output of this mine until the sale of SOG has been completed.
Exhaustion of the DLA Stockpile:
In 2007 the Defense Logistics Agency has reported that it will exhaust 100% of its supply of tantalum materials, thereby eliminating them from the supply chain which they supplied for many years.
The End of Fixed Price, Fixed Volume Contracts:
Cabot Corporation has noted that the fixed price, fixed volume contracts established in 2000 are coming to an end, and the market is entering into a new environment where pricing and shipment volumes may vary.
The Consolidation of EPCOS by KEMET
At the customer level, KEMET purchased the Heidenheim, Germany and Evora, Portugal tantalum operations of EPCOS AG. This continued the consolidation trend of 2005 when Matsushita sold their Tianjin tantalum plant to Nichicon.
Taken separately, the above-mentioned factors would have little impact on the supply chain for tantalum capacitors; however, when viewed collectively, it is entirely probable that we are entering into a period of uncertainty with respect to ore availability and price per pound for ore. The potential for volatility in the market does not necessarily make it so because many of the potential barriers to seamless business are man-made, and therefore could change rapidly as the market dictates.
The Changing Needs of Capacitor Manufacturers:
Additional trends are also affecting the tantalum capacitor industry in 2007:
The Growing Need for Higher Capacitance Tantalum Powders:
Tantalum capacitor manufacturers are demanding more powders with higher capacitance (between 100,000 and 200,000 CV/g), and this trend will continue over the next five years to support increased production of ultra-small case size tantalum chip capacitors and conductive polymer type tantalum capacitors.
The Movement to Conductive Polymer Cathode Capacitors:
Tantalum capacitor production is continuing its shift away from manganese cathodes toward polythiophene, polypyrrole and polyanaline conductive polymer cathodes. This is because conductive polymer capacitors have a safer failure mode and better performance (with respect to ESR) when compared to manganese based capacitors.
The Growth of Ultra-Small Tantalum Chip Designs:
The other major trend affecting the tantalum capacitor industry is the rapid increase in production of the ultra-small case size tantalum chip capacitor in the P and J case sizes, which have less than 8 milligrams of tantalum metal powder per anode. These ultra-small case size parts, which are largely produced in Japan, are consumed in digital video circuits in wireless handsets and digital video cameras.
Tantalum Powder Requirements Over the Next Five Years:
Capacitor manufacturers will continue to expand their unit output, with the largest increases in new volume coming from the ultra-small tantalum chip capacitors. Conductive polymer capacitors will also grow at a rapid rate, but this will be at the expense of the existing manganese based tantalum capacitors. Overall the effect on powder shipments will also be minimal, as we expect moderate increases in the volume of tantalum metal powder shipments to the capacitor industry. The value of those powders will change however, as higher CV/g powders, with higher prices per pound, are consumed in the production of the ultra-small case size tantalum chip capacitors and the conductive polymer type capacitors. Therefore, because of the changing nature of the product portfolio required by the industry it is highly probable that the value of tantalum metal powder consumption will grow at a faster rate than the volume of consumption between 2007 and 2011.