A poll of more than 50 attendees of recent workshops on the business implications of lead-free manufacturing revealed just 18% of respondents are actively working on alternatives to lead. The vast majority – 80% – of those responding is still in the beginning stages of preparations for the phaseout. And none of the respondents indicated they have converted completely (Disclosure: The seminar, An Introduction to Lead-Free, is sponsored by Design Chain Associates and EPTAC in conjunction with UP Media Group, publisher of Circuits Assembly.)

The numbers tell the story (survey conducted Sept. 30-Oct. 1):

· Evaluating need: 13
· Developing plan of attack: 19
· Plan in place: 1
· Going through conversion 7
· Completed: 0
· Did not respond: 13

So if you haven’t run that first lead-free board through your line yet, you are not alone. What makes this all the more interesting, however, is the recent run-up in prices of commodity metals – including those that are being counted on to replace lead in solder.

To wit: After lagging for years at an average of $4,000 or so per tonne, tin prices last year pushed past $5,000 and in May peaked above $10,000 before settling at slightly above $9,000 this fall. For a time solder vendors ate the price hikes, until last July, when Cookson Electronics Assembly Materials, reportedly the world’s largest buyer of tin for electronics solders, said enough, announcing that it would tack on surcharges when tin prices reached $9,500 on the London Metals Exchange. The price of metal in solder pastes “has now become a variable and critical cost element,” says Koki Co. Ltd. director of European support Gordon Clark.

Several leading solder suppliers I spoke with recently shared insights on the causes for the price spikes – and how to plan for future volatility. Most fingered – surprise – China’s consumption, coupled with refining bottlenecks, as the main culprits. While several factors are at play, most vendors agree with Kester vice president of marketing and business development Dave Torp, who cites “basic market supply/demand relationships.”

Excess supply in the late 1990s and early 2000s depressed prices, causing suppliers to close mines. (While not outright casting the world’s tin suppliers as a cartel, vendors note it’s a “relatively tight-knit group.”) Since 2000, China, which produces at least half the world’s tin, has shifted from a major exporter to a net importer, and that nation’s energy crisis has dampened its smelting output. Other forces are the tech comeback and higher tin content in new solders, which are “definitely creating more of a demand,” says Rick Black, president of AIM Inc.

Black warns that the ongoing metals inventory purge by the Defense National Stockpile Center (DLA) could exhaust certain tin stockpiles within two years. But, he says, “When the price goes up, so does investment in infrastructure. More metal will be pulled out of the ground.” Indeed, few believe tin supplies will suffer from the transition to lead-free, because supply will increase to meet the anticipated demand. “It’s a gradual move,” says Henkel Electronics president Pat Trippel. “[I]t could be a different story if everyone switches to lead-free in a short period, but we don’t expect that to happen.”

What that doesn’t mean, however, is that lead-free solders will cost the same as tin-lead ones. Says Cookson Electronics Assembly Materials president David Zerfoss: “We’ve put millions [of dollars] into research for lead-free capable materials and there’s a price tag for that and the products themselves are inherently much more expensive.” Bar solder contains a higher tin content than pastes, leaving some suppliers more exposed to tin pricing volatility. Zerfoss notes the shift from 63-37 to 90-plus% tin means the same joint will require less solder by 20% by weight to make, but the alloy composition by the weight of the bar will be 34% more. Bottom line: More consumption of tin and silver. Quips Zerfoss: “You cannot sell lead-free at the same price. Lead-free ain’t free.” Adds Koki’s Clark; “The assembly industry is going to have to rethink the demands of cost-down policies.”

Kester sees continued pressure on tin supply through 2005. Says Aim’s Black: “I don’t think [pricing] will go back anytime soon. There’s definitely a shortage of supply right now.” And tin is just one of several raw materials hit by price hikes. There have been “significant increases” in prices of isopropyl alcohol, a component in many fluxes. Indium prices have risen from $50 per kilogram to $800. Solder vendors are at the mercy of their suppliers. “The only thing [solder vendors] can control is the cost of manufacturing,” not the prices from the mines, Black says. Clark suggests standardizing on a surcharge policy: “Some form of surcharge seems a viable option in order to protect margins, and would be best adopted as an industry norm,” he says.

Going back to our poll results, what happens when the real shift to lead-free takes place? Will raw materials become even more scarce? Are OEMs (or more accurately, consumers) prepared to digest perhaps significantly higher prices just so our kids won’t run the risk of eating lead-laden circuit boards? Or will the mines start churning out enough ores in time to make this a non-issue? My bet is the heaviest feet will belong to the mines, and all of us will be footing higher prices in the months to come.