The Output of Tungsten Concentrate will be Reduced by More Than 10%. Can the King of War Metal Recover the Price?

Recently, the China Tungsten Industry Association held a symposium of leaders of tungsten enterprises (groups) in Ganzhou. The meeting unanimously agreed that the participating tungsten enterprises (groups) will jointly maintain the supply order of the tungsten raw material market, and this year's production of tungsten concentrates will be reduced by no less than 10%. According to the statistics of China Tungsten Association, the annual output of tungsten concentrates of participating enterprises (group) accounts for 86% of the output of China Tungsten Association. The main tungsten enterprises (groups) in China have taken the lead in reducing production, and will actively play an important role in improving the current supply and demand contradiction in the tungsten market. 

As one of the “key” minerals in the world, tungsten ore has been favored by all countries. The UK Geological Survey has listed tungsten as the top supplier list of materials needed to maintain the UK economy and lifestyle. At the end of 2016, the country released “National Minerals”. Resource Planning (2016-2020), which lists tungsten as a national strategic minerals catalogue, as a key target for macro-regulation and supervision of mineral resources, and provides differentiated management in terms of resource allocation, financial input, and mining land.

Regarding the mining of tungsten ore, China has implemented total mining control and limited mining, which shows its preciousness.

In 2019, the first batch of tungsten concentrates (65% of tungsten trioxide, the same below) mining total control index was issued according to 50% of the 2018 annual index. The first batch of tungsten concentrate mining total control index was 49,835 tons, including 38,005 tons of main mining index and 11,830 tons of comprehensive utilization index.

I. Tungsten Label: War Metal

Tungsten was first discovered in 1783. It is the metal with the highest melting point on the earth and its melting point exceeds 3400 degrees Celsius. It is widely used in the automotive industry and defense field, especially in the field of national defense. Tungsten is a gun barrel, a superalloy for engines, and a rocket. Necessary elements for the production of nozzles, armor-piercing bullets, and electromagnetic guns. During the several wars in history, the demand and price of tungsten have increased significantly, and tungsten has also been hailed as the "king of war metal."

Similar to rare earths, China is a global tungsten reserves and a major exporter.

According to the US Geological Survey's 2015 statistics, the global detected tungsten reserves amounted to 3.3 million tons. China's tungsten resources are about 57% of the world's total reserves, ranking first in the world.

According to the statistics of China Tungsten Association, in 2017, China exported 35,400 tons of tungsten products (including hard alloys and metal), a year-on-year increase of 27.29%, a record high since 2008. In 2018, despite the impact of Sino-US trade friction, the growth rate of export tungsten products slowed down significantly in the second half of the year, but the annual export of tungsten products still reached a record high and continued to remain high.

Europe, the United States, Japan and South Korea are the four major destinations for exporting tungsten products in China. In 2018, the amount of tungsten products exported from China to Japan, Korea, Europe and the United States accounted for 25.29% and 18.76% of the total exports of tungsten products, respectively. 31.16% and 13.96%, accounting for 89.17% of the total export tungsten products.

Second, the tungsten market: falling into a loss

In 2018, the annual average price of domestic tungsten concentrates was 106,000 yuan/ton, up 17.65% year-on-year. The increase was 13.5 percentage points lower than that in 2017, and the overall trend was stable.

In 2019, due to the lack of confidence in the tungsten market, the worries of market expectations, and the disturbance of overcapacity, the adverse reactions of the market were triggered. The supply and demand in the tungsten market was weak, the prices fell slightly, and the economic benefits of the industry declined.

According to the statistics of China Tungsten Association, the operating income of 123 major tungsten enterprises decreased by 10.78% in the first quarter, the growth rate was 31.9 percentage points lower than that of the same period of last year; the profit and tax decreased by 17.32% year-on-year, and the growth rate was 78.64 percentage points lower than the same period of the previous year; It was down 46.18% year-on-year. Among them: the profit of tungsten mining enterprises decreased by 34.79%; the profit of tungsten smelting enterprises decreased by 35.67%; the profit of cemented carbide enterprises decreased by 13.93%; the profit of tungsten enterprises decreased by 58.88%; the profit of tungsten and iron enterprises decreased by 82.26%.

In the statistics of China Tungsten Association, the loss of enterprises was 35.00%, and the loss was 14.27 percentage points higher than that in the fourth quarter of 2018, an increase of 20.27 percentage points over 2018. Among them, the loss of mining enterprises is 39.39%; the loss of smelting enterprises is 42.31%; the loss of hard alloy enterprises is 27.08%; the loss of tungsten enterprises is 36.36%.

Third, the future trend: opportunities and challenges coexist

At the supply end, affected by factors such as policy control, resource endowment, mining cost, safety and environmental protection, the output of the main mining tungsten mine and the comprehensive utilization output decreased. In the current global economic and tungsten market price situation, the suspension of production in foreign countries is still difficult to recover, the slow progress of new construction projects, coupled with market uncertainties such as Sino-US trade friction, foreign tungsten enterprises cautiously purchase and control inventory; In 2019, the demand for tungsten market will continue to maintain a low growth rate.

On the whole, the supply side tends to be stable, but the world economic uncertainty factors increase, commodity prices fluctuate, and the tungsten market opportunities and challenges coexist.