Minerals, Metals Face Uncertain or Constrained Supplies

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Minerals, Metals Face Uncertain or Constrained Supplies

The market for metals and other minerals is increasingly challenged by environmental regulations and various geographic concerns. Buyers must consider the relative inelasticity of supplies, as well as changing uses in markets outside of semiconductors.

By Aaron Hand

June 3, 2010 – At SEMI’s Strategic Materials Conference earlier this year, various speakers warned that mineral and metal sourcing can be a particularly dicey business, subject to the uncertainties of political dynamics, shifts in oversupply or undersupply, and in some cases, surging prices. Minerals aren’t exactly something you can just look up in a catalog and order online, noted Keith Long, project chief of minerals at risk and emerging technologies at the U.S. Geological Survey (USGS).

Most cobalt comes from the Congo, which is not considered politically stable, Long noted. Prices for copper, which is usually in oversupply, started skyrocketing in 2002 when China suddenly started using lots of copper and mines had trouble keeping up with the demand. And virtually all rare-earth elements come from China, which is keeping an increasing percentage of its production for its own use, putting the world’s supply at risk.

Rare earths and other materials that are mined face particular constraints because mining has a fixed capacity, and is unable to respond to changing demands, Long explained. “Demand can shift very significantly in less time than it takes to add mine capacity,” he said. “There’s a systemic risk of supply shocks.”

Although rare earths are relatively abundant, it is not easy to extract the desired elements from the ore. At the Mountain Pass rare-earth mine in California’s Mojave Desert, the ore that’s mined contains less than 1% of the desired elements. Mountain Pass is the only U.S. producer of rare-earth elements, but because of environmental concerns the mine has been mostly inactive since 2002. However, driven by rising demand and concerns over China’s tightening export plans, full mining operations are expected to begin again in late 2011.

Environmental regulations have fundamentally changed the way mining proceeds, Long said, noting that Mountain Pass was originally discovered (in the late 1940s) and in production in four years. “It could never go that fast today,” he said. “Five to 10 years is a highly optimistic schedule for putting a mine in.” Then a mine typically only stays open for 10 to 15 years, he added.

The Mountain Pass Mine in California’s Mojave Desert contains rare-earth metals. Because of environmental concerns, the mine has been mostly inactive since 2002. However, full mining operations are expected to begin again in late 2011 because of increased demand for rare-earth metals. (Source: Plazak)

To add to material supply concerns, other markets are demanding many of the same materials that the semiconductor industry needs, so buyers need to understand not only the actions of their direct competitors, but the dynamics of other markets as well, noted both Long and Lita Shon-Roy, senior managing partner at Techcet Group.

Silica supply, for example, is used in a variety of other industries, with the most recent constraint caused by a rise in China’s economy that has boosted the use of toothpaste there.

Poor demand is impacting the tantalum market, causing mines to shut down while they wait for the price to come back up. Prices are expected to double in the next year or so, according to Shon-Roy, mainly due to escalating raw material prices, while supply faces a shortfall.

Meanwhile, polysilicon supply is expected to greatly overshoot demand. There are seven major suppliers serving this market, Shon-Roy says, and many of them have doubled capacity and continue to add capacity. And there are more than 12 new potential players as well. Although plans could change and some suppliers could back out, if they all produce what they’ve announced, polysilicon capacity in 2011 could be 5× or more higher than it was in 2006, she adds.

The materials market, which dropped, on average, 20% in 2008-2009, is not expected to see a full bounce-back in 2010, according to Shon-Roy. Chip fabs want to pay less for materials, she notes, and they’re willing to accept lower quality to get it, relaxing control requirements. Green is in, Shon-Roy adds, and metals and silica are being increasingly recycled and/or reused. The metals markets will continue to be constrained.

The price of gold has had a significant impact on semiconductor packaging. In fact, the trend to ever-smaller gold wire diameters has been driven by rising gold prices. Heraeus (Hanau, Germany) realized 33% savings in metal costs when it decreased its gold bonding wire diameters from 25 µm to 20 µm, according to Dan Tracy, senior director, industry research and statistics, at SEMI. The company could save another 35% if it took diameters down to 15 µm, he says, signaling big changes in the wire market simply based on the price of gold.

A trend to ever-smaller gold wire diameters has been driven by the rising cost of gold. (Source: SEMI and TechSearch International)

One area of change based on the price of gold has been an increased use of copper wiring. Although _90% of wire shipments last year were gold, the percentage of copper wiring has risen from 2% to 5% since 2007, Tracy says. And more companies are evaluating the use of copper wiring in semiconductor packaging applications.

SEMI released a report in late January about copper vs. gold wire, with survey results showing that although 59% of the responding chipmakers do not yet use copper wiring, 72% are considering the switch to copper wire for new products. The report, commissioned by the World Gold Council, raises concerns about copper’s reliability and yield.

At SEMICON West on Wednesday, July 14, IMAPS and SEMI will present a TechSITE session called Intelligent Uses of Precious Metals in Microelectronics to discuss some of the best ways to save costs.