Tungsten concentrates, FeW jump on supply crunch

European prices for tungsten concentrates have hit their highest level since mid-May amid reduced spot availability in Europe coupled with low inventories after months of weak buying interest and global production cuts, with ferro-tungsten also at a multi-month high.

Argus' assessment for 65pc tungsten concentrates rallied to a six-month high of $165-172/dmtu in-warehouse Rotterdam on 24 November, its highest since $170-180/dmtu in-warehouse Rotterdam on 11 May, and drawing closer to the $165-180/dmtu level of late November 2019. "Suppliers in the international markets are refusing to sell as they have no volumes," a buyer said.

Sellers and traders in Europe took steps to reduce their inventories amid a prolonged period of demand weakness earlier this year, having entered 2020 dealing with last year's supply overhang. And now there is limited material available to replenish those stocks as Chinese production cuts lead to a drop in exports. Exports from China, the world's major tungsten producer, fell by more than 25pc year on year to 1,260t in September, Chinese customs data show.

After remaining on the sidelines for much of this year, some European traders are looking to take a position in the tungsten market in expectation of prices rising further in the near term.

Chinese buyers are facing a similar concentrates supply crunch, boosting local prices for 55pc grade wolframite to Yn82,000-83,000/t ex-works China on 19 November, up from Yn81,500-82,500/t ex-works on 17 November.

In contrast to concentrates, European ammonium paratungstate (APT) prices are currently holding steady at $210-220/mtu in-warehouse Rotterdam after rising early last week, supported by low inventory levels and the yuan's appreciation against the dollar. APT prices hit a year-to-date low of $205/mtu in-warehouse Rotterdam in July-August as sluggish demand and the summer holiday period weighed.

Europe-China FeW arbitrage closes

The European ferro-tungsten market has reacted to tight supply of tungsten concentrate feedstock, with prices also being bolstered by low spot availability of the alloy itself as a major Russian producer runs into financial difficulties and cold weather conditions hamper CIS operations.

Market participants told Argus they have been unable to find alloy for prompt delivery in Rotterdam this week.

Prices for 75pc grade ferro-tungsten reached $29-31/kg duty unpaid Rotterdam on 24 November, up from a year-to-date low of $23.90/kg in early August.

But despite the absence of a real demand increase in Europe, ferro-tungsten prices swung above China this week for the first time since late April.

The China-Europe arbitrage gap was as wide as $3.30/kg for much of September as Russian material — which is lower on the cost curve — was plentiful in Europe and demand in China far exceeded that on the continent. Until recently, traders could buy Russian material and sell that same material for around a $2/kg premium to buyers in China.

But that arbitrage window has all but closed in the past week as the supply shortfall in Europe led the region's market back into balance.

Looking forward, market participants expect prices to rise as European spot supply remains scarce, but muted demand could limit further gains.

In China, prices could get a boost as producer Ganzhou JTG Tungsten (JTG) halted its ferro-tungsten production, with the country planning to stockpile material ahead of Christmas and the Chinese new year celebrations in February 2021.

By Anuradha Ramanathan and Maximillian Court