Changes in tantalum supply are expected to have the largest impact on trends and prices in the tantalum industry over the next decade with a focus on recovery in Australian production following some short-term instability from the impact of COVID-19 and a general downturn in lithium consumption. Roskill also forecasts positive growth in tantalum demand of 4.6%py between 2019 and 2029 in its new report, Tantalum: Outlook to 2029, 15th Edition; however, demand growth will be outstripped by that of rising supply.
London, UK, April 16, 2020 (GLOBE NEWSWIRE) -- Australian recovery on the horizon
Initially, Australian tantalum concentrates supply (as a by-product of lithium mining) had been expected to rise sharply in 2019 with new operations coming on-stream and ramping up extraction rates. Australia had already begun to take market share from traditional African producers through 2018 while, at the same time, global prices began to fall with from their mid-2018 high of US$101/lb.
From early 2019, however, the lithium market weakened as a result of major cuts to Chinese electric vehicle (EV) incentives, and concomitant tantalum output tumbled from producers such as Talison Lithium, Pilbara Minerals, and Alita Resources. At the same time, price trends reversed, with recovery from their low of US$53/lb in August 2019 on reduced by-product output from Australia.
While Australian supply is likely to remain subdued through the first half of 2020, new announcements from the Chinese government in March, to extend subsidies for the country's EV sector until 2022, are likely to stimulate a return to strengthening lithium demand and revitalise the Australian tantalum sector.
Australia's gain could mean Africa losses
Elsewhere in the world, some production made a temporary return in H2 2019, filling the gap left by the scale-back in Australian material. This trend is expected to reverse once larger amounts of Australian concentrates once again enter the market.
Africa accounted for an estimated 47% of primary tantalum supply in 2019, dominated by artisanal production in the Great Lakes region of Central Africa (mainly DRC, Rwanda, and Burundi). Artisanal producers have the ability to adapt quickly to changes in the market. African production increased after 2012, following a resurgence in confidence from customers outside China as initiatives such as the US Dodd-Frank Act helped to reduce fears of conflict mining. Despite this, the lower cost and perceived sustainability of Australian material has proved very attractive, at the expense of African production.
Brazil remains a major producer of tantalum via the operations of AMG (Mibra) and Mineração Taboca (Ptinga), alongside some additional artisanal operations. Both major producers have undergone expansions in recent years.
Strong demand growth underpinned by rising electrification and high performance
Strong growth in demand for tantalum will be underpinned by increasing rates of electrification in our homes and, more importantly, in the automotive sector, which will drive growth in the major end use, capacitors, as well as for tantalum chemicals and sputtering targets. Fifth generation (5G) networks will also put greater requirements on the electronics of smartphones, offering shorter response times and higher download speeds.
Meanwhile, the superalloy industry is poised for a troubling 2020 with a downturn in production of LEAP-1B engines for Boeing's grounded 737 Max aircraft. The spread of COVID-19 is also expected to have a negative effect on aeroengine production while, in the longer term, the switch away from fossil fuels could harm the sector, especially demand for superalloys in industrial gas turbines (IGTs).
Tantalum will continue to be used in niche, high-performance applications, limited from more widespread use by its cost, but vital in the sectors in which it is used with little fear of substitution.
Prices stable for now
Supply-side disruptions have traditionally had the biggest impact on concentrate price trends in recent years, including the introduction of the Dodd-Frank Act in 2010, the fire at AMG's Brazilian Mibra operation in 2017, and more recently, swings in Australian by-product supply.
After rising in early 2020, concentrate prices have now stabilised, reaching US$62/lb by mid-March.
While recovery in Australian supply is expected to once again put a downward pressure on prices, real prices could be more positive, with growth depending on supply disruption from COVID-19, increasing demand, and a reluctance of new producers to flood the market having learnt from previous lessons.
Roskill's Tantalum: Outlook to 2029 report was published in March 2019 and details trends in tantalum production, consumption, trade and prices, as well as profiling the major industry players.
