Low demand, geopolitical woes weigh on APT market

A steep downturn in consumer spot demand and geopolitical turmoil dragged European tungsten prices to a near three-year low, with the premium to the Chinese market narrowing, despite the yuan's depreciation this month.

European prices for ammonium paratungstate (APT) dropped below $200/mtu for the first time since mid-February 2017 and to their lowest since October 2016, Argus data shows.

Average European APT prices' premium to Chinese export prices have narrowed sharply to just $1.10/mtu this month, in from $27.20/mtu in July.

The impact of scant spot demand in Europe from the automotive and cemented carbide sectors was further highlighted by the narrowing of the Europe-Chinese spread at a time when the yuan had fallen to an 11-year low against the US dollar, with major Chinese producers planning to reduce production to limit losses.

In November 2017, the average European price flipped to a discount to China after Beijing began introducing environmental protection policies and inspections of tungsten production facilities.

In addition to the demand lull, potential oversupply from the bankrupt Fanya Metal Exchange stocks further weighed on the market. Fanya is believed to have held around 30,000t of APT stocks when it collapsed, and this could be sold at auction — as was the case with the indium stocks sold earlier this year.

The narrowing price spread with Europe has also resulted in a drop in Chinese APT exports.

According to Chinese customs data, APT exports reached 1,136t in April-June, up from 928t in the first quarter of this year and 944t in fourth quarter of 2018. In the fourth quarter of 2018 and first quarter of 2019, the APT differential with Europe averaged of $9.20/mtu, but had widened to $17.90/mtu in April-June.

Despite various supply, demand and macroeconomic headwinds, which have curbed wholesale prices, tungsten projects in Europe might stay on track as the region looks to reduce its dependence on Chinese APT exports.

China produces 80-85pc of the world's tungsten.

APT monthly avg prices