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. These low prices have led to reduced tungsten output around the world — in 2015, eight large Chinese tungsten announced plans to cut production, while Canada’s only tungsten mine was placed on care and maintenance. Overall, world tungsten production came to 86,400 MT in 2016.
Even so, analysts remain hopeful that a recovery in tungsten prices is coming in 2017. 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.
Tungsten investment: Supply and demand
Tungsten is mined all over the world, though China leads the way in production. In 2016, it produced 71,000 MT of the metal, far ahead of Vietnam, the world’s second-largest tungsten producer. Russia, Bolivia and Austria are also top producers of tungsten.
Typically tungsten deposits are found near orogenic belts, which are areas where tectonic plates have collided to form mountains. These belts run through the Far East, 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 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 recently strengthened its conflict minerals rules, while in the US it’s possible that rules put in place by Barack Obama could be eliminated under President Donald Trump.
In addition to being the world’s top tungsten producer, China is also the top consumer of the metal. Roskill says that when both primary and secondary tungsten use are taken into account, the Asian nation accounted for just under 50 percent of global tungsten demand in 2015. The EU is next in terms of tungsten consumption, followed by the US and Japan. Other users outside of these areas accounted for just under 10 percent of all tungsten consumption in 2015.
As mentioned, tungsten has a variety of uses, though most of it goes toward the production of cemented carbide. Cemented carbide tools are used in the aerospace, automotive and construction industries, as well as in oil and mineral exploration and mining.
Mill products also require tungsten. 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.
Tungsten investment: How to invest
Some investors who believe tungsten prices will rise in 2017 and beyond are taking 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 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 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.
Beginner tungsten investors may want to check out our recent overview of the tungsten landscape in Spain, Portugal and UK — click here to read more about some of the tungsten companies operating there. Information on tungsten companies located in Asia, North America, Africa and Australia can be found here, and will be updated in the near future.
This is an updated version of an article originally published by the Investing News Network on May 27, 2013.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.