Tungsten prices rose to their highest peak in a decade in May this year. In this article for The Crucible, Project Blue explores the factors driving this development.
Black Swan, by Faiz Zaidi at Shuttlestock
Tungsten concentrate prices in China reached ten-year highs in the latter half of May 2024. Concentrate prices peaked on 21 May, with 65% WO3 wolframite concentrate prices closing at US$21,600/t and 65% WO3 scheelite concentrate bids ending the day at US$21,400/t. These peak prices represented a 24% increase for both types of concentrate compared with prices at the beginning of the year. For context, the combined average tungsten concentrate price for 65% WO3 in 2023 was US$16,800/t. Consequently, midstream and downstream tungsten products, including ammonium paratungstate (APT), ferrotungsten, and tungsten powder, all increased in price by approximately 22%.
The increase in tungsten prices started in the latter half of 2023. As such, to fully understand the factors that contributed to the abovementioned tungsten price movements of 2024, we need to review the events that have occurred in the market since then.
A review of the Chinese tungsten market in 2023
According to Project Blue, Chinese tungsten mine production was relatively high last year, reaching record production of 68kt WO3-in-concentrate. We expect production in China to have peaked in 2023 and to plateau over the coming years before declining in line with mine resources and reserve exhaustion. Meanwhile, Chinese demand was estimated to be closer to 62kt. Although this may appear to be a significant imbalance, when accounting for material losses during processing and refining, the Chinese tungsten market was likely closer to balance. This observation is supported by the
relatively stable prices seen throughout the year.
There were some price fluctuations during the year, but nothing unusual. Prices trended upwards at the start of the year, peaking in February. This upward movement is typical for tungsten prices as it coincides with the Chinese New Year, when mining operations are reduced, leading to decreased raw material supply and an opportunity for prices to rebound. Subsequent to the New Year holiday period, mining operations resumed, causing prices to drop again.
Concentrate prices continued to decline in the second half of the year due to an influx of tungsten scrap on the spot market and low demand for concentrate. Prices hit their lowest point for the year in the first half of November, averaging US$16,200/t. During this period, feedstock availability on the spot market started to decrease. As a result, concentrate prices increased by more than US$400/t in the latter half of November. This marked a turning point for concentrate prices, which increased for the next six months, eventually reaching ten-year highs by May 2024. Concentrate prices averaged US$16,900/t in December and US$16,800/t in 2023.
What pushed up tungsten prices?
1. Supply tightness
Tungsten prices have increased since the second half of 2023 due to limited raw material supply availability on the spot market. This shortage worsened in early 2024 due to reduced mining activity and major tungsten companies preferring to sell concentrate on long-term orders (~80% volume) instead of on the spot market (~20% volume), according to Project Blue’s sources in China.
Many large tungsten enterprises were reported to have scaled back production or suspended it entirely in preparation for furnace maintenance during the Chinese New Year holiday period. Additionally, China’s Two Sessions Gathering, held shortly thereafter, did not result in any significant budget or economic announcements that would have supported increased production. Project Blue estimates that China’s GDP growth for 2024 will remain at 5%, with no major stimulus measures in place. Furthermore, in March, China’s Ministry of Natural Resources announced that the first batch of 2024 tungsten mining quotas would be set at 62kt for primary tungsten mining enterprises, a 1.6% decrease from the previous year. This is the first tungsten ore and concentrate mining quota decrease observed since 2019. It is understood that the quota mainly disrupted production in the Heilongjiang, Zhejiang, and Anhui provinces. No major tungsten-producing provinces were affected; however, overall nationwide production levels fell, and supply was tight in China in Q1. This has gradually pushed up concentrate prices, albeit by a modest 2% since the beginning of the year, to an average of US$17,500/t by the end of March.
2. Stringent safety and environmental checks
While prices rose modestly in Q1, the dynamic changed abruptly in Q2, and Chinese domestic prices rose to their highest point in a decade. In late March, China’s Ministry of Natural Resources announced that it would conduct safety and environmental checks in key mining regions across the country, including in the Jiangxi and Hunan provinces, the two largest tungsten-producing hubs in China.
As a result of these checks, many small mining operations (producing less than 80tpy) were suspended or shut down after
having been found to be operating with invalid licences and, in some cases, overproducing, according to Project Blue’s sources in China. Environmental inspections followed, mainly affecting mines and APT smelters, with a focus on wastewater and slag disposal.
Various APT producers had to suspend operations and perform maintenance or upgrade furnaces at smelters to comply with environmental guidelines. This disruption led to reduced APT production, and further widened the market gap between upstream and midstream.
Over that of reduced mine supply between March and May concentrate prices rose to US$21,600/t, a level not seen in the past 10 years. The last such peak had been reached when tungsten metal traded on the ill-fated Fanya Exchange between 2011 and 2015.
During that period, the metal was stockpiled as an investment and withheld from the market to drive up prices, and the prices of tungsten concentrate, tied to the exchange-driven price of metal units, passed the US$24,000/t mark in July 2013, setting a historic record.
3. Speculative trading
While not the main driver, speculative trading also contributed to the increase in tungsten concentrate prices in Q2 this year. Project Blue understands that speculative positions were taken by traders who purchased tungsten concentrate stock from the spot market.
With spot supply already limited, the acquisition of a few units by traders restricted supply availability further.
Implications of the high prices
The rise in the cost of raw materials hit the profitability of APT producers in turn impacted metal refiners and carbide manufacturers.
According to Project Blue’s sources in China, the midstream APT selling price was lower than the cost of purchasing concentrate.
Some APT producers reported losses ranging from RMB3,000/t to RMB4,000/t (US$415–550/t). Downstream, tungsten powder facilities were reportedly operating at a breakeven point. Consequently, midstream and downstream producers began increasing their product prices in response to the high raw material costs. By May, the prices of APT and downstream turngsten products had increased by approximately 22% on a year-to-date basis against the same period in 2023.
However, sluggish end demand in the local market did not help the midstream and downstream producers make their case for such a price increase. Project Blue forecasts that tungsten demand in China will remain relatively unchanged in 2024 compared to 2023.
With margins squeezed, midstream and downstream production stagnated, with producers choosing to purchase raw material hand to mouth only when they have secured new orders. Otherwise, they have been fulfilling long-term contracts using their existing stock of raw material or topping up with the limited amount they could get from the spot market.
All this has led to several notable changes in the Chinese market. Midstream and downstream producers have started to look outside China for raw materials. According to trade data, China’s tungsten ore and concentrate imports more than doubled from January to May compared with the same period last year, an overall 118% y-on -y increase. In addition, China’s tungsten scrap imports rose by just under 20% over the same period, indicating that Chinese downstream producers preferred importing raw materials, whether primary or secondary, over purchasing more expensive local supplies.
However, prices outside China also became less affordable, since ex -China pricing trends typically follow the pattern set by China.
Price bust
With all these factors in play, the market price rally was short-lived. After peaking in May, prices fell about as fast as they had risen. By mid-July, tungsten concentrate prices had dropped by approximately 16% from their peak. This downward trend is expected to continue as prices adjust to market conditions. The price surge in the first half of 2024 can be considered a “Black Swan” event, a term coined by Nassim Taleb that he defined as “an event that was improbable, but nonetheless of high impact”.
By Luke Adriaans
Project Blue
Critical Materials Forum London
If you are out and about in London in the afternoon on Tuesday 1st October, we would like to welcome you the Critical
Materials Forum London, held in partnership with critical materials consultancy Project Blue.
This year’s event, focusing on supply chains for energy transition, returns to the Royal Society of Chemistry in Piccadilly.
Registration is at 1.30pm, and the seminar and panel session from 2-4pm will be followed by Project Blue networking
drinks. This event is FREE, but was packed last year, so please pre-register HERE now to secure your place.
