Weak electronics sector weighs on metal demand

Low demand for consumer electronics is weighing on demand for components such as semiconductors, capacitors and touch screens, as well as the metals used to produce them.

Demand for consumer electronics has slumped this year as a weak macro-economic picture and high inflation has squeezed consumer spending, and this slump has fed back up the supply chain to weigh on demand for electronic components and the minor metals used to produce them.

In its financial year ending in September, Apple's net product sales dropped by just over 6pc on the year to $298bn. Apple's product sales decreased in the first, second and third quarters, recovering a little in the fourth quarter with the release of a new range of iPhones. But fourth-quarter sales still fell by about 5pc from a year earlier to $67.2bn.

Sales by South Korea's Samsung Electronics' "Device Experience" (DX) division — which includes smartphones, televisions, tablets and wearables, as well as larger devices such as refrigerators and air conditioning units — declined by 10.5pc year on year in the first three quarters of 2023 to 126.5 trillion won ($97.4bn).

This extended period of lower consumer electronics demand and the uncertainty about when demand will improve has resulted in lower sales for component makers and a bearish outlook for electronic metal markets.

Taiwanese electronic component maker Hon Hai (Foxconn) reported that its revenues fell by 7.2pc year on year between January and October.

And revenues at the Taiwan Semiconductor Manufacturing (TSMC) decreased by just over 11pc year on year to $49.68bn in January-September. TSMC is the largest global producer of semiconductor chips, and while its revenues have been supported by the ramp-up of its advanced 3 nanometer technology, this was offset by customer inventory adjustments, the company said.

US-based glass manufacturer Corning, which produces the durable glass used by Apple for its iPhones and other touch-screen products, increased the net sales of its display division by about 5pc in January-September this year, compared with 2022, following price increases. But the company noted lower sales volumes in the first and third quarters and that customers were moving from a pandemic-style "just in case" model back to a "just in time" model.

Touch-screen displays are a major downstream sector for indium metal as glass touch screens are coated with an indium-tin-oxide thin film. Indium prices increased globally in the second quarter following speculation that the metal could be included under new Chinese export restrictions. But this speculation was unfounded, and prices have since started to trend lower as a result of low spot-buying demand and ample stocks among consumers. Argus last assessed prices for 99.99pc indium metal at $260-300/kg duty unpaid Rotterdam, down by about 5pc in the past three weeks.

Tantalum prices also have come under significant downward pressure as a result of low downstream demand from the electronics industry this year. Tantalum is used in the capacitors of many portable electronic devices, as well as in the production of some semiconductor logic chips and memory chips.

Prices for tantalite, the raw material used to produce tantalum metal and oxide powders, have averaged $84.82-87.40/lb cif main port so far this year, down from an average of $96.92-101.43/lb through 2022, and are currently on a sharp downtrend as many consumers have pulled back from the spot market entirely because of poor downstream demand and uncertainty about when demand may rebound.

Bismuth prices also are trending lower. Argus last assessed prices lower for 99.99pc bismuth metal at $3.90-4.15/lb duty unpaid Rotterdam on 7 November, down from the 2023 peak of $4.20-4.60/lb in May-June. Bismuth often is used as solder to join electronic components together inside computers, mobile phones and televisions.

One of the few exceptions for the downtrend trend is gallium metal. The Chinese government introduced export controls on gallium products, used in advanced compound semiconductor technologies, from August this year, restricting the availability of the metal in Europe and lifting prices to a 13-month high of $450-475/kg cif main airport in October. But prices in China now have started to trend downwards as a result of slow demand from domestic gallium consumers and a lack of exports. Argus last assessed domestic Chinese prices for gallium metal at 2,100-2,300 yuan/kg ex-works, down from Yn2,300-2,500/kg on 31 October.

Looking ahead, metal market participants and consumer electronics producers expect demand to remain muted until at least the second half of next year.

"Markets are reflecting lower prices owing to softer demand," a minor metals trader said. "I feel that all minor metals will drift downwards for this next month or two unless strong demand is coming from China, which is also unlikely."

"Based on current inventories we do not expect to enter the spot market earlier than the second half of 2024," a western tantalum consumer said. "Tendency more on 2025."

By Sian Morris