Dryblower: Is that a minor metals boom on the horizon?
Tuesday, January 06, 2004
JAPANESE semi-conductor makers are a happy lot. Dryblower knows this because he saw the results of a survey conducted by Nihon Keizai Shimbun Inc at the end of December. No less than 95.7% of semi-conductor makers believe their industry is in a recovery trend and 90% plan to boost production.
Ah, so what, you may ask, what's this got to do with the mining industry?
Quite a lot actually because there are many minor metals consumed in the production of electronics gear, and a boom in semi-conductors means that a boom in gallium, germanium and Dryblower's favourite, tantalum, might not be far away.
Drawing a precise link between smiling Japanese technical specialists and miners digging up odd rocks is not easy. Many dots in the chain need to be connected to get the full picture with the biggest gaps being the time factor, the size of existing metal stockpiles, and whether the clever chaps at Tokyo Denpa, or NEC Tokin Corp, have found ways to cut back on the use of expensive metals – or substitute them entirely.
Testing the link between events in Tokyo and outback Australia or Africa is not easy. The share price of Sons of Gwalia, the world's biggest producer of tantalum, is up – but so is the gold price, SOG's major metal, and so is the level of optimism at the company which has had a couple of horrid years.
From 12-month low of $1.32 set last February, SOG's are up to $3.59, though not much has happened since the stock cracked the $3 mark last September. Dryblower reckons that most of the gain over the past three months is gold related. The tantalum effect is yet to kick in.
For casual observers of the mining scene like Dryblower, or serious investors prepared to put their money where their mouth is, there needs to be more evidence of a link between events in Japan and demand at the mine.
And this is where Dryblower indulges in a bit of guesswork, so readers under 16, or those not accompanied by an adult, should turn away now.
Dryblower's hypothesis is that the Nihon Keizai Shimbun survey is the best part of a year ahead of dinkum metal demand. In other words, what the semi-conductor makers are saying in their survey will not have an effect on sales of tantalum, germanium, tellurium, gallium (and other metals sold by the teaspoon) until the second half of 2004, and perhaps later.
The major problem is stockpiles. These simply have to be drawn down before fresh orders can flow.
But, having issued a warning there is no doubting the optimism in Tokyo – and also no doubting what can happen should a shortage emerge, such as the world is currently seeing in iron ore and other less exotic metals.
Take this comment from the Tokyo survey and attributed to Yuichi Haneta, president of NEC Tokin. "The business is back around the 2000 peak" – a remark made with specific reference to tantalum capacitors for cellular phones and digital cameras.
Even a crusty old codger like Dryblower finds that to be pretty interesting, verging on the optimistic. The key now will be seeing whether that "business back to the 2000 peak" as seen through the eyes of a semi-conductor maker flows into the share price of tantalum producers because in 2000 SOG's started the year around $4, and by early 2001 was heading for $10 – before the steam ran out of the stock.
Lightning never strikes twice (so, that's a warning to you bulls out there), but the tantalum market can be a remarkable place with mood swings that make nickel look stodgy.
SGW
sons of gwalia limited
