The tungsten market has recently witnessed several years of volatility and is currently undergoing another period of change. In early 2017, the refractory metal had just started to see the first signs of recovery following a downturn in its largest end use market, the cemented carbide sector, where demand had been suppressed in the traditional consuming bases of the USA and Europe. Prices were also shrugging off the spectre of the failed Fanya Metal Exchange in Kunming, China, in which ammonium paratungstate (APT) had been traded and ultimately stockpiled.
These factors, combined with improved market demand in the oil & gas and automotive sectors, called for greater volumes of tools and their raw materials, such as tungsten. This coincided with the Chinese government launching a widespread programme of environmental reforms, focused across a swathe of Chinese industries and notably at tungsten mine and smelter sites.
China has for several decades been the world’s largest mine and refined producer of tungsten, accounting for just under 80% of mine output in 2018, according to Roskill analysis, or some 61kt of contained tungsten metal. It is similarly dominant in the production of the tungsten intermediates APT and tungsten oxide, and of tungsten metal powder and tungsten carbide. A large proportion of this output feeds the country’s substantial cemented carbide tool sector, but there is also sizeable export of tungsten refined and finished products to the rest of the world – making Chinese mine and refined production of tungsten integral to conditions in the global market.
The environmental inspections thus had an immediate effect on tungsten availability, with APT prices buoyed to several-year highs; in September 2017 the European APT price peaked above US$300/mtu, having only recovered to US$200/mtu at the start of the year. The turnaround in tungsten market fortunes continued into the first half of 2018 as environmental clampdowns in China continued. Year-on-year demand for tungsten also rose by nearly 5%, contributing to tightness in supply. APT prices peaked at US$350/mtu in June 2018, before declining steadily throughout the second half of the year as most large-scale tungsten mines and APT smelters returned to the market.
The tungsten sector now finds itself facing prices not seen since early 2017. One of the primary reasons for lower prices in 2019 has been poor demand in the Chinese market, mainly as a result of lower production in the automotive and mobile phone sectors, which has affected cemented carbide tools use. Roskill estimates that a third of tungsten units were ultimately consumed in automotive applications in 2018, primarily cemented carbide or high-speed steel tools. A slowdown in China is therefore of concern to tungsten producers.
Lower market demand has also been compounded by the ongoing trade dispute between the USA and China. In May 2019, US President Donald Trump pushed ahead with a 25% tariff rate applied to US$200Bn of Chinese exports, effective 10 May 2019, after postponing the increase originally due in January 2019 as trade talks between the two countries continued. The tariffs, an uplift from the 10% rate introduced in September 2018, affect a host of chemical, metal and finished products, including ferrotungsten and tungsten‑containing tools.
The tungsten market is now in a position whereby prices are at levels difficult to justify investment into new mines, precisely at the time when new mines will need to start construction in order to fill the gap created by China’s strengthening environmental stance. The inspections in 2017 and 2018 resulted in the closure of small and inefficient mine operations, while some of the larger and older state-owned mines are expected to close over the next several years due to ore grade depletion. In theory, the approval of new tungsten mining rights in China is still suspended and will only be lifted under certain conditions—such as if one of the applicants is a state-owned producer, or the proposed location is considered to be an area of high poverty. Similarly, by 2020 mine quotas will cap tungsten output at 120ktpy of concentrates on a 65% WO3 basis (61.6kt contained W), effectively keeping them at 2018 levels of production.
In the rest of the world, there are several near-term tungsten mine projects on the horizon, including W Resources at La Parrilla and Saloro at Barruecopardo, both located in Spain. Russian tungsten group Wolfram is also developing a new domestic mine project to satisfy its internal requirements. In the next wave of developers, King Island Scheelite has secured off-take for part of its planned output from the Dolphin project in Australia, while Thor Mining has appointed Argent Partners to assist with arranging offtakes and financing for the Molyhil project, located in the Northern Territory of Australia. Meanwhile, in South Korea, Almonty Industries aims to bring online its Sangdong project in 2021.
There is a mixed outlook for tungsten in the next decade, with uncertainty around changes in some of tungsten’s key end use sectors; namely car markets, where electric vehicles have the potential to disrupt tungsten use, and in tungsten mill products for lightbulbs, which are being phased out in favour of more environmentally-friendly light emitting diode (LED) lamps. On the upside, tungsten use in high-value and high-tech applications such as aerospace and electronics is growing strongly, and manufacturing activity in general will assure a long-term future for tungsten demand.