Low supply, rising demand send APT higher: Correction

Corrects price in second paragraph

European prices for tungsten intermediates have risen to an 18-month high, bolstered by low inventories, Chinese production cuts, renewed spot demand and reduced scrap availability.

Prices for ammonium paratungstate (APT) with min 88.5pc WO3 content climbed to $260-265/mtu duty unpaid in-warehouse Rotterdam today, an increase of $10/mtu from the 25 February assessment of $250-255/mtu, after steadily rising since the start of the year. APT prices are now at their highest since reaching $268-280/mtu du Rotterdam on 10 June 2019, Argus data show.

"Momentum is building in Europe… demand is slowly coming back," a market participant said, noting the return of some large consumers to the European spot market.

Around 40t of APT was recently sold at $263/mtu du Rotterdam, and another 20t traded at $265/mtu this week. Meanwhile, a US buyer booked 10t of tungsten at $263/mtu.

Rising freight costs because of container shortages and lockdown restrictions in many parts of the world have delayed commodity shipments into Europe, triggering sharp price increases in the region. In addition, soaring tungsten scrap prices amid reduced spot market availability pushed demand for tungsten intermediates higher. Argus-assessed consumer prices for 99.9pc min tungsten scrap solids rose for three consecutive months to reach $33.15-35.40/kg duty paid US fob processor on 26 February.

The pace of APT price gains in Europe was slower before China's lunar new year holiday last month, but prices rallied by 7pc in the second half of February, compared with a 5.6pc jump in January.

Low stocks

Weak tungsten prices and sluggish spot demand have led to a steep drop in European market liquidity over the past three years, with prices sliding from a 2018 high of $350/mtu. This has led to most traders reducing their stocks and being reluctant to take positions in the market despite the continuing price rally.

But the lack of spot market buying and the stock drawdowns over the same period have renewed demand for replenishing inventories, while the limited number of sellers has hit competition.

"Consumers need to buy more this week… and they have no-one to buy from," one market participant said. Exports of tungsten intermediates to Europe have been falling from China, Bolivia and central Africa over the past few years. Chinese APT exports declined by over 66pc to 1,064t in 2020, from 3,161t in 2019, while tungsten trioxide shipments fell to 4,212t from 7,691t over the same period, according to customs data.

Tightness in Chinese concentrate production at the same time as a seasonal decline in output from Russia and Mongolia also lifted prices for 65pc min tungsten concentrates, which climbed above $200/dmtu in the final week of February.

China export prices rise

China's tungsten exports have fallen significantly because of weak global demand amid Covid-19, and because of production cuts. The country produced 138,612t of tungsten concentrate containing 65pc tungsten trioxide in 2020, down by 5.31pc from 146,380t in 2019, data from the China nonferrous metals industry association show.

Tighter availability has led Chinese domestic consumers to raise their bids for APT and tungsten concentrates. Chinese state-controlled tungsten producer Xiamen Tungsten increased its APT bid price for the second half of February, while tungsten carbide producer Guangdong Xianglu also upped its bid for the same period.

Robust Chinese consumption and curtailed production are further supporting global prices, many market participants said. Argus-assessed export prices surged by $8/mtu today to $258-263/mtu fob China, while domestic APT prices have averaged over 6pc higher this year at 136,712 yuan/t compared with the 2020 average of Yn128,275/t.

By Anuradha Ramanathan