Historic high prices for tin and silver are in the cards between now and 2018 as demand for the two metals in solder used in the electronics industry continues to climb and supply fails to keep pace, Jon Hykawy, head of global research at Byron Capital Markets, warned at a conference on electric metals sponsored by the investment dealer in Toronto on April 19.
Prices for the two metals shot up six years ago after the European Union banned lead from all products sold in Europe, effective July 2006. The reasoning behind the Restriction on Hazardous Substances Directive (RoHS) was that a large percentage of electronic waste is never recycled, and that metals and other materials in electronic devices can simply dissipate into the environment.
The directive meant that the formulation of conventional solder — with 63% tin and 37% lead — had to be reconfigured. The result was that the de facto standard in the electronics industry became solder that is typically 96% tin, 3.5% silver and 0.5% copper by weight. They may also contain small quantities of manganese or zinc.
The problem is that supply of the two metals — primarily of tin, but also for silver, which is used as a conductive paste in the solar industry — just wasn’t keeping up with demand. The compound average growth rate for silver production between 2001 and 2010 was 2% and the rate for tin was 1%, he says.
“Mining production levels for tin have suggested that the growth rates in output are absolutely anemic,” the clean technologies and materials analyst declared in a presentation at the conference. “It’s not that there was no economic incentive for anyone to bring additional supply into the market. You definitely would have if you could have, [but] they can’t.”
As a result, prices for tin rose from US$7,385 per tonne in 2005 to US$8,755 in 2006, and by 2011 had reached US$26,051 per tonne. Silver prices demonstrated a similar trajectory rising from US$7.32 per oz. in 2005 to US$11.55 per oz. in 2006, and by 2011 had climbed to US$35.12 per oz.
Hykawy predicts silver prices will move from US$35 per oz. to as high as US$68 per oz. by 2018, and tin will surge from US$26,000 per tonne in 2011 to about US$59,000 per tonne during the same period.
The analyst forecasts major tin shortages by 2018.
“We found that even with all the projects that we could identify globally that desire to come to market by then, the world will be in tin shortfall,” he concludes. “At that point we have a serious problem with respect to tin supply. We have a serious problem with respect to the provisioning of solders that will meet RoHS requirements. We have a serious problem getting our iPads and our iPhones. And this is an interesting dilemma.”
Recent discussions with one solder company confirmed Hykawy’s suspicions that the electronics industry isn’t prepared for the impending tin shortages. The company admitted that while there were issues with future tin supply, they were looking into substituting tin with materials like bismuth. When Hykawy told the company that annual production of bismuth was 1,500 tonnes per year compared with 150,000 tonnes of tin, and that bismuth was only marginally less toxic than arsenic, the company said they were working on it.
“Tin and silver, and especially tin, are likely to come into shorter and shorter supply, and that’s going to put a squeeze on prices in the near term, [and] it’s going to be potentially disruptive in the longer term,” he cautions. “We’re going to have higher prices because most of the really good deposits are gone. We have been mining tin and silver for a very, very long time. And the best grades, the easiest deposits to find, the most metallurgically amenable deposits — our grandparents and our great grandparents got those.”
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