Tungsten could be walking a supply-demand tightropebut this...

Tungsten could be walking a supply-demand tightropebut this company has high hopes for the European market

Mining

1 hour ago | Emma Davies

Argus reckons thatglobal tungsten fundamentals are hanging in the balance for 2022 with supplychain disruptions, rising production costs and higher global infrastructurespending likely to support prices.

But prolongedunderperformance in the automotive and aerospace sectors are threatening tosuppress demand growth.

“Consumers,producers and traders in Europe saw strong downstream demand for the firstquarter of 2022, which encouraged buyers to build higher ‘safety’ stocks thisyear,” Argus deputyeditor, metals, Anuradha Ramanathan said recently.

“Many automotiveOEMs continued to produce partsthis year to avoid another bottleneck when the expected semiconductor chip shortage eases,” she said.

“The auto sectoraccounts for around 28pc of total tungsten demand, with carbide cutting toolsused in vehicle manufacturing and for producing mechanical parts.”

Tightening Chinese spot supply could push up theprice

Chinese tungstenproducers continue to face depleted high-grade resources and increasedproduction costs because of environmental laws, labour costs and safetyguarantee costs, which left ammonium paratungstate (APT) offers firm inDecember.

“As the world’slargest tungsten exporter, China’s production levels, ore grades and governmentpolicy give the wider market price signals, while as one of the world’s largesttungsten consumers, domestic demand and consumer reference prices for tendersalso support the market,” Ramanathan said.

“With Chinabacking a ‘zero tolerance’ stance on stemming the Covid-19 spread, global tradecould witness a sudden and complete halt in imports and exports — such as withthe closure of Ningbo port earlier this year — which could tighten tungstenspot supply and push up costs.”

Essentially thisconcern is what’s underpinning higher prices in Europe and the US market.

Ramanathan flaggedthat European prices for APT with 88.5pc tungsten trioxide content rose bynearly 39 per cent since the start of 2021 to $320-325/mtu in early December,which puts the year-to-date average at an increase of 68 per cent to $285/mtucompared with the 2020 average of $217.87/mtu.

APTprices in Europe, China $/mtu. Source: Argus.