Tungsten More “Critical” on Expected Supply Shortage

A metal is deemed critical when it is found to be economically important to the functionality of society, but has a high risk of supply disruptions. In 2011, The British Geological Society published a list of what it considers the 52 most critical metals in the world. The list was compiled based on global abundance, location of production, reserves and supply risk associated with the political stability in the jurisdictions where the metal occurs.

Considering that over 80 percent of tungsten comes from China, and that China is tungsten’s largest consumer, it is not surprising that the metal made the list in 2011. Add to that mine closures, halts in production and overall lack of new supply from mines in the western world, and the outlook for tungsten supply doesn’t look very good.

At the Geological Society of South Africa’s 2013 GeoForum conference in Johannesburg last week, Core Consultants MD Lara Smith pointed at three metals (or groups of metals) that will be at a high risk of supply scarcity from 2015. Smith explained that while the European Union and US Department of Defense don’t wholly agree on all the metals they consider critical, tungsten, tantalum and rare earths are without a doubt at the top of both their lists.

Smith also said that in recent years, tungsten supply has not been able to keep up with rising demand, which has necessitated the sale of tungsten stockpiles by the Chinese, Russian and American governments. “Based on China’s decision to limit exports to the rest of the world, we estimate that the primary tungsten market is in deficit and, this year, we expect the deficit to be in the order of 15 000 t,” Smith warned at the conference.

Prices

A shortage of supply, though bad for the market, can definitely be good for prices. Tungsten APT prices are currently sitting at $400 to $410 per metric ton unit.

Metal-Pages reported that “Chinese tungsten APT prices have kept rising as smelters try to avoid APT production costs rising higher than sales prices.” Buyers, the smelters explained, are unwilling to pay more than 215,000 renminbi per tonne. Prices for tungsten APT 88.5 percent have climbed from last week’s 212,000 to 215,000 renminbi per tonne to 215,000 to 220,000 renminbi. So far this year, prices have climbed by 22 percent.

Meanwhile, European ferrotungsten prices have also risen sharply following an announcement from Vietnamese producer YoungSun that due to power-related issues, it is uncertain as to when shipments will return to full capacity. YoungSun has confirmed that it will only be able to meet 50 percent of its deliveries for the remainder of the year. Prices for ferrotungsten min W 75 percent have risen from $47.50 to $49.50 per kilogram to $48.50 to $50.25 per kilogram.

Company news

Almonty Industries (TSXV:AII) restarted mineral processing at its Los Santos project six days after a fire caused a suspension of the plant’s activities. An electrical fire on June 23, 2013 destroyed the diesel generator power supply and caused severe damage to the electrical switching infrastructure, the company said it a release. Almonty is working with its insurance adjuster and plans to restore normal shipments of tungsten concentrate shortly.

Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.