FeW supply fears brew in Europe, focus on China

Supply concerns are growing in Europe's ferro-tungsten market as the Russia-Ukraine conflict hampers trade and deliveries of already-contracted Russian alloy, and leaves China as the continent's predominant source of supply.

European prices for 75pc grade ferro-tungsten surged to $44-45/kg duty unpaid Rotterdam yesterday — their highest level since April 2014 — with offers heard yesterday as high as $45.80/kg in-warehouse Rotterdam. Overall, Argus' assessment has risen by nearly 20pc since the start of 2022 — also supported by tight spot availability of scrap and concentrate, which has pushed up feedstock costs and still remains a challenge.

Some market participants are doubtful that there is sufficient production capacity globally to offset the loss of Russian ferro-tungsten exports, most of which typically go to Europe. But others indicate that Chinese producers could alleviate supply pressures, albeit seeking a steep profit margin. "The Chinese have the upper hand. If there are no exports from Russia, then we need to find alternatives," a European trader said.

Argus last assessed Chinese export prices at $39-40/kg fob China on 1 March, up by around 10pc from the start of 2022. The European market's premium to Chinese export prices has widened since mid-January, and that premium is now at $5/kg, its highest level since May 2012, Argus data show, underscoring the severity of the regional supply crunch and potential for Chinese exporters to compete within the European market.

China's largest ferro-tungsten producer, Ganzhou JTG, and other Chinese traders have been receiving more enquiries from international consumers this week — negotiations on price are still ongoing.

Some smaller suppliers in Vietnam and South Korea, which either halted output or produced negligible volumes over the past year, could ramp up output but are unlikely to significantly contribute to plugging the supply gap, some market participants said.

China's ferro-tungsten output totals around 7,000t/yr. Total exports rose by 46pc on the year in 2021 to 2,195t, according to China's customs data.

Brazil could also be a potential source of supply. "Maybe swing production from Brazil will show up in Europe," one trader said, although they raised concerns about the grade and quality of the material.

Looking ahead, more stringent sanctions on Russian commodities or alloys, coupled with escalating shipping disruptions, could put further strain on the ferro-tungsten supply chain. And given there is great uncertainty about the future implications of the Russia-Ukraine conflict, many market participants are holding back, preferring to wait and see how events unfold.

By Anuradha Ramanathan & Sian Morris