Nuclear reactor cooling towers with water steam. Photo by Valerie Quimener at Shuttlestock
After a dramatic spike in 2022, hafnium’s price has fallen somewhat closer to earth. By historical measures the price is still strikingly elevated but the volatility post-2021 appears to have subsided for now. In this note, we take a look at where we think things might be going.
In every market the fundamental issue is the supply-demand balance. For hafnium, supply is contingent on recovery of zircon sands because there are no primary hafnium mines. Zircon sands generally contain hafnium in the ratio of 1:50 to the contained zirconium.
For most applications of zirconia (ceramics, refractories, etc.) the contained hafnium has no impact on product performance, because hafnium and zirconium exhibit remarkably similar chemistry. However, in the case of zirconium metal, hafnium can be an unacceptable component.
The principal use for zirconium metal is in nuclear reactors, where it is the main metal in fuel rods (typically around 98% zirconium). Zirconium is transparent to neutrons, while hafnium is essentially opaque. To produce nuclear-grade zirconium the hafnium must be stripped out.
Removing the hafnium is chemically challenging but is now achieved both by solvent extraction and by molten salt distillation. This process, dehafniation of zirconium, is where all hafnium available to the market comes from.
A typical nuclear reactor replaces its fuel rods on a 3-year cycle, requiring around 10t of zirconium per reactor per year. Factoring in manufacturing yields this translates into around 6,000tpy of zirconium in total for the nuclear power industry, so perhaps 120tpy of hafnium (metal basis).
Supply comes from companies in China, France, Russia, and the United States. Depending on the details of Chinese separation of zirconium and hafnium (about which there is very limited information), supply could be a little higher than this.
China is in the middle of a very ambitious build-out of nuclear reactors and is expanding its zirconium supply accordingly, although CPM suspects that some suppliers have struggled to meet quality requirements and that any excess supply will be small. This explains why prices remain high by historical standards.
On the demand side, hafnium is generally used only where it cannot readily be substituted, as befits any high value material. Of course, this means that demand cannot respond quickly to changes in price, or to put it another way, demand is short-term price inelastic. Hafnium’s major markets include aerospace superalloys, plasma cutting torches, metallocene catalysts, nuclear reactor control rods, space alloys (such as C-103), optical films, and semiconductors.
Semiconductor demand sits behind the recent price spike.
While hafnium has been used in semiconductors since being introduced into them by Intel in 2008, applications in memory in the last few years have dramatically expanded the use of hafnium.
The escalating price of hafnium reportedly has had an impact on some segments of demand, including plasma cutting and perhaps metallocene catalysis. Both these markets have substitutes (such as zirconium) that are functionally less effective but that, at the right price differential, become attractive. However, producers of superalloys cannot easily replace or even reduce substantially their use of hafnium. And meanwhile the demand for hafnium in space applications has been growing. Thus, the market is and may well remain tight.
So, what could change the outlook? There are several important variables worth considering.
First, semiconductor demand is growing again. Wafer starts in Q2 2024 increased over Q1, the first quarterly increase since mid-2022. This suggests demand in perhaps the least price-sensitive segment of the hafnium market is growing, which means further tightness may be on the horizon.
Offsetting this, however, is the use of dysprosium in place of hafnium in AI chips. Dysprosium is used because it offers stable performance at elevated temperatures (AI chips generate huge amounts of heat) even though its dielectric properties are inferior to hafnium. Still, it represents a potential substitution threat in semiconductors.
Second, many reactors are at the end of their life but are being recertified. To help cope with the damage caused by decades of irradiation, hafnium is being considered as a protective element to maintain reactor integrity as part of the recertification process. This could represent a meaningful amount of new metal demand.
Third, on the supply side, there is an emerging trend in the nuclear industry to increase reactor enrichment levels. More-enriched fuels need to be replaced less frequently, meaning the annual demand for zirconium may decline over time. We see this as a concern for the 2030 decade but also a high probability development.
Fourth, we understand anecdotally that during the recent price spike some suppliers may have run their separation plants to recover hafnium beyond the amount required to produce nuclear-grade zirconium. At high enough hafnium prices this makes economic sense if the resulting dehafniated zirconium is sold into markets that normally do not specify dehafniation, or even (at high enough prices) if the separated zirconium is simply landfilled.
Fifth, there are announced plans for very large expansions of supply of hafnium in China, with a single processor supposedly adding hafnium capacity roughly equivalent to current demand. We discount this plan but a substantial expansion of supply in China is a possibility and (looking at metals like gallium) could have a profound impact on price.
Finally, we also need to keep in mind that hafnium is a dual-use material. At present the market balance appears to CPM to be maintained by Chinese exports of hafnium metal. Should China introduce export restrictions on hafnium, this could be very disruptive to the market.
To conclude: CPM sees a tight market today with perhaps a modest amount of available capacity to respond to demand growth and the scope to increase supply meaningfully around current price levels. However, there are potentially significant factors that could dramatically affect our outlook, both on the demand side and the supply side.
Things are smooth for now but there could be turbulence on the horizon.
CPM Group is pleased to announce that it has just published the first edition of its Hafnium Review and Outlook, a comprehensive study of the global hafnium market in 2024 and projections for 2030.
By Andrew Matheson and Patrick Stratton
About the authors
CPM Group is an independent commodities research, consulting, and investment banking advisory company headquartered in New York.
The company is considered the foremost authority on markets for precious metals, along with manganese and molybdenum. Its entry into tantalum, niobium and hafnium research came through a new collaboration with Andrew Matheson and Patrick Stratton, who are both recognised experts in these markets.
Andrew Matheson, the founder and principal of OnG Commodities LLC, has 25 years of experience in the tantalum industry, leading Cabot Corporation’s tantalum ore procurement and mineral development activities, as general manager of Cabot’s sputtering target business and serving as director of R&D. His experience includes a range of other specialty materials including niobium, scandium and rare earth metals.
Patrick Stratton spent 16 years with Roskill, where he led the tantalum and niobium research. His experience also covers gallium, magnesium metal and titanium. In addition to being the lead author of published research reports on these commodities, he has also undertaken many consulting assignments for producers, project developers, financial institutions and government bodies.
