Global tungsten market in flux on supply chain woes

A myriad of supply and demand shocks along the global supply chain have combined with the US dollar's depreciation against the Chinese yuan to lift tungsten prices higher this month, despite weak consumer demand outside China.

On the supply side, primary tungsten concentrates are in short supply after Chinese suppliers curtailed or halted production in August. China's decision to cut production in the second half of 2020 was driven by oversupply, with supply then further tightened by Covid-19 lockdown restrictions, heavy rainfall and declining ore grades.

The country's production of concentrates containing 65pc tungsten trioxide fell by 2.38pc to 126,675t in January-November 2020, down from 129,767t in the same period of 2019, data from the China nonferrous metals industry association show.

A tungsten concentrates buyer in Europe said they are willing to pay a slight premium to European suppliers in order to ensure delivery without delay, stemming from soaring freight costs and logistical issues.

Furthermore, lower global tungsten consumption in 2020 has reduced the availability of scrap. US consumers are being "caught short by the scrap situation", one seller noted, with container shortages further exacerbating the sense of supply tightness. One supplier this week sold multiple containers of yellow tungsten oxide (YTO) to a consumer in the US at $245/mtu for prompt delivery, which is around $10/mtu above the European ammonium paratungstate (APT) price.

The latest Argus assessment for tungsten 99.9pc scrap solids consumer rose to $30.65-32.85/kg fob US processor on 31 December, up from $29.76-31.97/kg at the end of November. A trader indicated that scrap prices could currently be as high as $33-34/kg in Rotterdam.

China has also raised its export prices amid stronger domestic demand and the dollar's depreciation against the yuan.

But an overall lack of spot demand in Europe has left consumers grappling with shrinking margins, with one European consumer noting that stable-to-low tungsten carbide prices and higher raw material prices are raising costs. Tungsten is used to produce cutting, construction tools and alloys used by the oil, gas and aerospace industries.

In Europe, the average monthly price for APT with minimum 88.5pc tungsten trioxide (WO3) has risen by nearly 6pc from December to average $233.75/mtu for January so far — in line with rising Chinese export prices, which climbed by nearly 5pc to an average of $235/mtu fob China over the same period.

Prices for tungsten concentrates with minimum 55-70pc WO3 content rose to $180-185/dmtu on 26 January, up by 3pc from December's monthly average of $172.40/dmtu, while domestic prices in China rose by nearly 4pc month on month to a year-to-date average of $13,572/t ex-works China.

By Anuradha Ramanathan