In just over a month, the EU’s lead free electronics initiative will force component manufacturers in Europe to find an alternative to traditionally used solders. Currently, electronics manufacturers in Europe and America use solders made of lead to attach semiconductors onto integrated circuits. But with the metal toxicity issue receiving such negative publicity, politicians in the EU declared a new mandate to remove all toxic metals in integrated circuits by July 1, 2006.
This new mandate continues a losing streak for lead that started over 30 years ago. Since then, lead has been outlawed from gasoline, has been removed from almost all paint products, and is being challenged for the car battery market. In each instance, other materials have gained market share at the expense of lead. In this particular case, the biggest winner of all will be tin.
As an alternative to currently used technologies, the new solders will be composed of approximately 96% tin. In fact, this material has already become the solder of choice in Asia and is rapidly gaining momentum in the Americas. Despite the increasing miniaturization of semiconductor circuits, the pure volume of solder needed to produce billions of devices each year uses more than half of the tin mined in the world annually. With the new European regulations, the demand for tin could accelerate rapidly over the next few weeks.
Despite tin’s potentially for rapid price appreciation, there are certain drawbacks to the new solder material. First, it requires a much higher melting point than the previously used technology. This makes manual use of solders that much more dangerous. Secondly, it has a tendency to crystallize and grow spikes over time. As this is a quite remarkable, but unpredictable process, the potential for short circuits is greatly increased. Manufacturers have struggled to deal with this problem, and many are still unsure what the correct solution is. Some have advocated a tin-silver-copper compound, while others are more inclined to use a nickel plating over the tin solder.
The price action in tin recently has followed along with all the other metals. In just a week, the price dropped 10% and could very easily continue in the same direction over the next month. The Commodity Investor believes that further consolidation is imminent in most metals, with tin being the most likely candidate to buck this trend. For those investors willing and able to endure a potentially sharp decline, tin may prove to be an excellent long term investment. However, at this juncture, more conservative investors would be better served waiting on the sidelines. In a few months time, tin may be trading a significant discount to today’s price.
by The Commodity Investor