Thailand: Tantalising Prospects?

2003

Tony Diller

If you are reading this from your laptop, chances are good that a tantalum capacitor is transmitting the signal. Tantalum, element 73 (Ta), is a sought-after metal found not only in computers, mobile/cell phones and play-stations, but also in alloys used for turbine blades, rocket heat-shields, smoke detectors and even in surgical wiring for broken bones.

Thailand ranks among the world's major reserves of Ta and similar rare-earth elements. The main Europe-based Ta producer has just provided the Thai economy with a US$70 million vote of confidence through increased investment in a Ta processing facility in the eastern-seaboard Maptaphut industrial area, just down the coast from well-known Pataya beach.

Over the past several years refined Ta has been subject to price instability ranging from US$100 to $1000 per kilogram. Those following Ta ore production elsewhere, for example in Western Australia (WA), may find the Thai investment perplexing. WA represents another key Ta source, but the major Australian producer, Sons of Gwalia, has recently seen its share value flop.

The Ta market has sunk into its current phase pressed down by large stockpiles coupled with flattened demand for electronic components following the 2001 dot-com crash. Also of concern to investors is the spectre of new tantalum substitutes, some much cheaper. In spite of these factors, those behind the large Thai Ta investment must be looking for a market upturn, but how soon?

Back in 1986 Ta production achieved some notoriety in Thailand, when opposition to a Phuket Ta refinery on environmental grounds brought together 70,000 protestors and led to a costly arson attack. Phuket had seemed a logical refinery site. Tin slag is a good Ta source and centuries of tin mining have left the island with huge accumulations of this slag. Also, nearby mountains are rich in rare-earth minerals, including Ta ores. However, the Ta extraction process relies on chemicals such as potassium chloride and sulfuric and hydrofluoric acids. The danger of spills catalysed the nascent Thai green movement and mobilised the Phuket tourism sector into a firm opposition.

Four years after this setback, Ta refining moved to Maptaphut, where the controlling interest soon went to the subsidiary of a German company better known for analgesics. Perhaps with Phuket headaches in mind, Bayer Thailand has made sustained efforts to soothe Thai environmentalists. The company, which also produces polymers and related products, has sponsored youth ecology camps and environmental-awareness programs, including guided Maptaphut tours. For now at least, the Ta story is one of success.

WATCHPOINT: Following from the tantalum case, will combined Thai and global conditions lead to similar investments that can both aid economic recovery and play a constructive role in environmental protection?

 

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AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.

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