There's been a bit of price action, which has prompted me to take another look at ASM.
The main thing that has changed as far as I can see is that Hafnium Prices recently have increased to ~$4500 to $5000 per kg from maybe $1k per kg depending how far you go back. What is Hafnium? It's a minor metal with a total global supply of probably <100t per year - no one seems to know precisely.
Is the price increase significant for the company? Yes as ASM has a significant amount of Hafnium, but I don’t think it’s a game changer. The main reason being that I can't see a price of $4k being structural.
Zirconium usually occurs naturally with Hafnium, mostly in a ratio of 50:1. Google suggests there is ~ 1 million (or significantly more) tonnes of zirconium produced worldwide, which at this ratio means there is theoretically about 20 000 tons of hafnium being sent out with that zirconium. If the price goes up, it would make sense to me for more companies to bother to separate the zirconium from the hafnium (it does already need to be separated for nuclear use), though I think this is a complicated process. The main point here being that it doesn’t seem like hafnium is particularly rare compared to the quantities used, but more it’s rare for it to be separated from the zirconium. In addition to this, the Dubbo project could theoretically produce 150-200t per year, which is around double the current supply. Consequently, it seems to me that the current high Hafnium price seems to be more of a bottleneck in availability/separation rather than a long term structural situation.
I currently hold ASM, but may sell at some point. There seems to be a bit of excitement on Hot Copper around the Hafnium price, so we'll see what happens.
I may be wrong in my analysis above, there's not much out there on the topic, DYOR.
Further reading
https://www.youtube.com/watch?v=gzV6uOsqLTc&t=1s
- General overview of Hafnium
https://www.asx.com.au/asxpdf/20170512/pdf/43j6znb47kwyt4.pdf
- Chart from above youtube clip. Hafnium supply ~2017 - 35T Areva (French nuclear), 20T ATI Wah Chang,10T recycled, 6T other. Also lists demand.
https://www.reuters.com/markets/commodities/aerospace-electronic-demand-drive-hafniums-400-record-surge-2023-02-03/#:~:text=Aerospace%2C%20electronic%20demand%20drive%20hafnium's%20400%25%20record%20surge,-By%20Seher%20Dareen&text=Feb%203%20(Reuters)%20%2D%20Shortages,taking%20them%20to%20record%20highs.
- Hafnium prices between $4500 to $5000
https://www.argusmedia.com/en/news/2400153-japans-nuclear-policy-shift-to-spur-metal-demand
- Russia + Ukraine account for 8% of supply. (Possibly accounting for a current shortage.)
https://blog.agchemigroup.eu/a-case-study-examining-the-supply-chain-of-2-key-rare-earth-elements/
- 60% of hafnium is used in maker superalloys that can withstand extreme high pressure and high temperatures. Some use in silicon circuits also. Also welding, nuclear control rods, and catalyst precursors.
- Ian Chalmers claims that Dubbo could produce ~150 to 200 tonnes per year, where the total market is predicted to total 100 to 160 tonnes per year by 2025.
- Alternatives may be found if the price is too high.
https://hotcopper.com.au/threads/ann-dubbo-project-optimisation-delivers-strong-financials.6470750/
- Latest optimisation study. Hafnium figures are based on 30t per annum at $1010 per kg for a total value of $30 300 000, which would be ~4% of revenue. 30t at $4000 is $121 200 000.