Suppliers that have grappled with shortages and price hikes of palladium-the single largest raw-material cost in multilayer ceramic capacitors-could see shipment delays again by year's end.
"Last year, at the end of December, Russia ran into problems trying to get export decrees passed and signed, which caused shipment delays. And it looks as if they're heading in that direction again because of the political turmoil," said Michael Nave, a metals trader at Johnson Matthey plc, Wayne, Pa.
Palladium prices had eased late last year after doubling to $248 per troy ounce in August 1997. This year, prices have leveled off at around $300, after going as high as $400 per troy ounce because of erratic shipping schedules in Russia, where political struggles continue.
The country supplies roughly 55% of the world's palladium. And South Africa, which produces about 35% to 40% of the world's palladium supply, doesn't have the capacity to increase output, Nave said.
Most recently, pricing has ranged between $290 to $295 per troy ounce, according to Nave. Suppliers didn't receive palladium from Russia in July, but shipments did resume in late August and early September.
As a result of the irregular supply and prices, key ceramic-capacitor suppliers have been taking a hard look since 1995 at base-metalelectrode materials as an alternative to palladium.
Base-metal-electrode products originated in Japan, where they primarily use high-fire processing, said Sandy Beck, vice president of worldwide marketing at Kemet Electronics Corp., Greenville, S.C. Palladium accounts for between 80% and 100% of electrode content in this process, so it was imperative for that technology to be refined quickly in Japan, he said.
The shift to base-metal electrodes moved more slowly in the United States because most U.S. manufacturers use a low-fire process that typically has a relatively high ratio of silver to palladium, Beck said. Palladium content is typically between 10% to 30%.
Kemet Electronics expects to introduce a base-metal electrode product line by year's end. There will be a price advantage in the high-capacitance values, according to Beck.
"Due to the relative newness of the technology, there are still some concerns with long-term reliability for base-metal electrodes, but they've weathered the test of time very well," Beck said.
Commercially, base-metal electrodes have been available for only three years, which was when Murata Electronics North America Inc. switched to base-metal solutions.
"Strong commercialization, in terms of making a concerted effort to switch our technology to base metal, started in earnest three years ago," said John Denslinger, Murata's vice president of sales, Smyrna, Ga.
"We recognize that we have to continue price reduction, and that's one of the ways we've been able to present justification to the customers," he added.
Last year, AVX Corp. introduced new lines of nickel- and copper-electrode products as replacements for palladium. The nickel electrode replaces high-capacitance X7R and Y5V dielectrics, while the copper electrode is used as a replacement for NPO. The majority of AVX's base-metal-electrode production is for nickel.
"Palladium is a precious metal and is subject to a fluctuation in prices, which can seriously affect our costs. As a result, we're trying to support our customers by producing product with materials that are not subject to precious-metal price fluctuations," said Craig Hunter, general manager for strategic marketing at AVX Corp., Myrtle Beach, S.C.
Suppliers that have been dealing with high palladium costs in the past two years haven't been able to raise prices. Pricing for ceramic capacitors is extremely competitive, according to Hunter.
"We're trying to move our costs by increasing our output of base-metal electrodes to enable us to maintain profitability and competitiveness in the marketplace," he said.
Ceramic-capacitor prices continue to decline, but at a much more modest rate, according to Beck.
"If you look at the price erosion over time, the current market price is well below where the learning curve suggests where it ought to be," he said. "Between the palladium content and price erosion, margins are very depressed."
Price erosion, however, will begin to abate, because there isn't much more that suppliers can subtract from the pricing equation, Denslinger added.