China has for several decades been the world’s largest mine and refined producer of tungsten, accounting for just over 80% of mine output in 2019, according to Roskill analysis, or some 61kt of contained tungsten metal. It is similarly dominant in the production of the tungsten intermediates ammonium paratungstate (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.
Upstream and refined tungsten supplies were thus substantially interrupted in 2017 and 2018, when the Chinese government launched a widespread programme of environmental reforms, focused across a swathe of Chinese industries and notably at tungsten mine and smelter sites. There was 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.
A second factor behind falling APT prices was falling output from the Chinese automotive sector, which emerged in the second half of 2018 and continued into 2019. Chinese car production is estimated to have fallen 9% y-o-y between 2018 and 2019, with output in 2019 dropping to 19.6M vehicles; the first time in three years the level has dipped under 20M. Car production is an important end-use sector for tungsten-containing tools, in addition to electrical contacts.
The other major Chinese influence on tungsten market fortunes in recent years — large stocks of APT resulting from the defunct Fanya Metals Exchange — saw a partial resolution towards late 2019 as the inventories were successfully auctioned off by the Kunming Intermediate People’s Court in September. The stocks, equivalent to 30% of China’s APT production in 2018, had contributed to poorer market sentiment in the second half of 2019, also weighed down by continued weakness in several tungsten end‑use markets but principally automotive and mobile phone sectors.
The winning bid by China Molybdenum was not anticipated by the market and with the unit price achieved in excess of the court guidance, sentiment improved and immediately spurred a jump in the European APT quotation to US$240/mtu in October 2019. Prices remained at this level through to January 2020 and may remain at higher levels after the Chinese Spring Festival when companies return to the market.
Looking ahead, the tungsten market faces several headwinds, including a potential sustained downturn in car production, which ultimately consumes about a third of all tungsten units. In addition, market sentiment remains subdued 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, affecting a host of chemical, metal and finished products, including ferrotungsten and tungsten‑containing tools. A resolution to trade discussions would be a major boost for tungsten markets.
There remain bright spots for the industry, however, with aerospace and electronics markets (users of tungsten alloys and mill products, respectively) set to continue growing strongly. In addition, there are opportunities further up the supply chain for new mine projects to come online. Several large mines in China and Russia are reaching their end of life and will need to be replaced for the market to remain adequately supplied. Almonty’s Los Santos mine in Spain also ceased mining in mid-2019 and will move to tailings reprocessing, which is expected to reduce volumes from this operation.