Port congestion supports EU APT premium
European tungsten prices are gaining additional support from bottlenecks at regional ports, consolidating a two-tier Asia-EU market as buyers attempt to gauge whether stimulus measures will lead to a near-term demand recovery in China.
[European prices for ammonium paratungstate (APT)](APT) remained stable at $345-350/mtu duty unpaid in-warehouse Rotterdam today, with sellers not willing to cut their offers. By contrast, fob China APT prices moved down on June 14, to $320-328/mtu from $322-328/mtu in the previous session.
"There is a two-tier market — there are cif offers from China close to $325/mtu levels, but you see a significant premium in Europe because shipments can take three months to arrive," a trader in Europe said. "That premium in prices shows you the risk [of delays and disruptions] of booking forward as well as the cost, because not everyone can finance material for that period of time," the trader added.
Ongoing labour strikes in Hamburg, Europe's third largest container port, are disrupting trade. This adds to bottlenecks in Rotterdam, with the Dutch port being one of "the most severely congested" in north Europe, shipping company Maersk said.
"The issues in and around European ports are ongoing and further pressures from strikes just compound it — delays at European ports are adding a month or more to some arrival times," the company added.
In the past, in situations like this, buyers could turn to air freight, but this is not a viable option anymore, market sources said. "Air freight is out of the question; we have looked into it assuming an extra $20/mtu but it went up to $70 because of very few options available," the trader added. "There is no way around."
Beijing's economic incentives
Beyond supply chain woes, demand in China has been weak for the second quarter of the year because of Covid-19-related lockdowns in east China. Chinese primary material consumers Zhangyuan Tungsten and Xiamen Tungsten cut their first-half June bid prices for tungsten concentrate and APT.
But over the past weeks some market participants showed cautious optimism after Beijing released a stimulus plan announced in May to boost economy. The plan comprises of 33 measures including tax rebates and infrastructure spending as well as monetary and financial policies.
"The stimulus plan is likely to turn the market around in the near future even though we are not seeing that just yet," a European supplier said.
For now, industrial production is gradually resuming in China, which is expected to have a positive impact on tungsten demand. China's May industrial production expanded 0.7pc year on year, according to the latest data from the country's National Bureau of Statistics. This compares with a contraction of 2.9pc in May. But market participants are still monitoring direction while exports are gradually increasing. Tungsten exports from the Asian country rose by 16pc in May, according to the latest customs data.
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