Russia's invasion of Ukraine has exacerbated existing concerns over the US supply base of ferro-tungsten, setting the stage for potential shortages.
Sanctions on financial institutions in Russia and a suspension of bookings at Russian ports from major ocean freight providers have rendered the country an unviable option for importing ferro-tungsten into the US, market participants said.
Since 2020, only five countries have exported ferro-tungsten to the US: Russia, Ukraine, Austria, Vietnam, and South Korea.
Russia has been a predominant source of the alloy and the most frequent exporter in recent years.
Logistical issues stemming from terminal closures and a halt in transporting material across the Sea of Azov and the Black Sea have made Ukraine an unworkable option for import as well.
Austria, Vietnam, and South Korea have each only exported ferro-tungsten in one month out of the last two years, according to the most recent data available from the US Commerce Department.
South Korean suppliers have offered less alloy to US buyers in recent years and do not have much to offer on a spot basis currently, traders said.
In Europe, nearly 65pc of Austria's alloy imports come from Russia and local producers will likely need to make up for the loss of supply in their own regional markets.
Otherwise, nearly 50pc of alloy imported into the Netherlands is of Russian-origin. Rotterdam, in the Netherlands, is considered the epicenter of European ferro-alloy trade.
Prior to 2020, China was a major supplier, but tariffs imposed by former US president Donald Trump prompted sellers to look elsewhere to source alloy and traders still say restocking from the region is not practical. No ferro-tungsten has been imported into the US from China since January of 2019, mostly leaving Vietnam as the primary source to restock alloy unless buyers return to suppliers in China.
At the same time, US alloy imports have steadily declined over the years in line with the trend of reduced ferro-tungsten consumption among US steelmakers, who mainly use it for machining, stamping, forging, cutting and to make tools.
Traders are reticent to commit to purchases with long delivery times as upward pressure on prices from the supply side may have subsided by the time alloy arrives at US ports. Conversely, hesitation to finance positions in ferro-tungsten may only exacerbate tightness should the military conflict become a protracted engagement.
Some consumers have replaced ferro-tungsten in their melts with different forms of tungsten scrap, including densalloy.
Sources estimated that the matter will be decided on whether shrinking demand outpaces shrinking domestic supply before the Russia-Ukraine conflict is resolved.
