Read on for a brief overview of the tungsten investment landscape, from supply and demand dynamics to how to invest.
The critical metal tungsten was discovered in Sweden in the 18th century, and since then has found myriad uses across diverse industries. About two-thirds of tungsten is used to make cemented carbide, while mill products and chemicals account for the rest.
While tungsten has many key uses, prices have been in the doldrums for the last several years. The low price of tungsten has led to reductions in output in some parts of the world.
In 2015, eight large Chinese tungsten producers announced plans to cut production, while Canada’s only tungsten mine was placed on care and maintenance. Despite those output cuts, world tungsten production came to 85,000 metric tons in 2019, up slightly from 81,100 metric tons in 2018.
While the global coronavirus pandemic has stalled industrial activities and economic growth, there is hope for a turnaround in the tungsten market once the crisis is under control.
Developments in infrastructure, 5G telecommunications and railroad construction projects are expected to boost demand for tungsten, especially in China. The Chinese government is projected to invest nearly US$5 trillion on more than 10,000 new infrastructure projects in 2020.
That optimism has left investors wondering whether tungsten investment is a good idea. Read on for a brief overview of tungsten supply and demand dynamics and how to begin investing.
How to invest in tungsten: Supply and demand
Tungsten is mined all over the world, though China is the world’s largest tungsten producer by far. In 2019, the Asian country produced 70,000 metric tons of the metal, far ahead of the 4,800 metric tons produced in Vietnam, the world’s second largest tungsten producer. Russia, Austria and the United Kingdom also host significant tungsten resources.
Typically, tungsten deposits are found near orogenic belts, which are areas where tectonic plates have collided to form mountains. These belts run through East Asia, the Asiatic part of Russia, the east coast of Australia, the Alpine belt and the Rocky and Andes mountains.
One issue surrounding tungsten supply is the fact that the metal can be found in war-stricken countries like the Democratic Republic of Congo. For over a decade the extraction of mineral resources in these areas has been linked to conflict, human rights abuses and corruption.
For that reason, tungsten is known as a conflict mineral. To stem the production of conflict minerals, some government bodies have put rules in place to ensure that companies disclose where the metals they use come from. The EU has led the way after strengthening its conflict minerals rules, while in the US President Donald Trump has added tungsten to a list of 35 minerals deemed critical to US security.
In addition to being the world’s top tungsten producer, China is also the top tungsten consumer, giving the nation a major influence over tungsten prices.
As mentioned, tungsten has a variety of uses correlated to the global economy. Tungsten carbide, alloy and chemicals are used in the construction, electronics, mining, automotive well as in oil, mineral exploration and mining.
Mill products require tungsten too. These products include tungsten rods, sheets, wires, light bulb filaments and electrical contacts; that said, tungsten’s use in light bulb filaments is declining with the introduction of new lighting technologies.
The chemical industry also consumes tungsten — tungsten compounds are used as lubricants, catalysts, pigments and enamels, as well as in electronics and for other electrical applications.
How to invest in tungsten: Getting started
Some investors who believe tungsten prices will rise in 2020 and beyond may take the opportunity to enter the space in today’s low price environment. However, getting into the tungsten market can be a little difficult — as with many critical metals, getting direct exposure to physical tungsten is tricky as the metal does not trade on an exchange.
As a result, many market participants who are interested in tungsten investment turn to tungsten-mining companies. Most tungsten-producing companies are located in China, and are either privately owned or listed only on Asian exchanges; however, tungsten investing options do exist elsewhere.
Investors interested in the tungsten market may want to check out our overview of the tungsten industry landscape in Spain, Portugal and the UK; click here to read more about some of the tungsten-mining companies operating there. Information on tungsten companies located in Asia, North America, Africa and Australia can be found here.
This is an updated version of an article originally published by the Investing News Network in 2013.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.