Tungsten Outlook 2019: Will Shortfalls Drive Prices Up?

2018 started with experts predicting that tungsten prices could trend higher if China — the world’s leading producer of the critical metal — reduced output.

That call was in some ways correct. Though prices hit three-year highs due to production limitations and growing demand for the versatile metal, they had flattened by the end of the year.

As 2018 comes to an end, the Investing News Network (INN) is looking back at the main trends in the space this year and what’s ahead for prices in 2019. Read on to learn more about the tungsten outlook.

Tungsten trends 2018: Price growth short lived

As mentioned, analysts believed at the beginning of the year that tungsten prices would continue on the positive trajectory they started in 2016. However, the metal ended the year slightly flat — much to the dismay of market watchers and producers.

“At the end of 2017, our expectations were for the strengthening of tungsten prices to continue with some modest levels of additional production from new or recently commissioned tungsten-mining operations,” said Mick Billing, chairman and CEO of Thor Mining (ASX:THR).

“We also expected that Chinese production costs would continue to rise, but that production levels from China would remain relatively constant,” he added.

Midway through the year, China announced that there would be restricted supply of ammonium paratungstate (APT) as key APT smelters in Jiangxi province were shuttered in order to comply with government regulations around tailings storage and slag treatment.

Tungsten outlook 2019: Less production, more demand

Despite demand expectations, tungsten prices took a brief stumble in mid-2018, coming to rest at US$340 to US$345 per metric tonne.

“The slump of 20 percent in the APT price in July and August has probably challenged all in the industry. Since then, the market has seemed to lack direction and has been looking for a catalyst to move either way,” explained Billing.

Looking ahead, demand for the critical metal, vital in making steel stronger and more durable, is expected to increase as stringent building regulations in China regarding the strength of industrial steel are implemented.

However, while Chinese consumption of the metal is stepping up, so too are environmental regulations around extracting tungsten, creating an air of uncertainty when it comes to output.

“We understand that more environmental inspections are scheduled in China, and that resulting from these more closures are expected. Unfortunately, we have no way of confidently predicting any outcome from this [situation],” added Billing.

In 2017, global tungsten production hit 95,000 tonnes, up from 2016’s total of 88,100 tonnes. International output in 2018 is expected to top last year’s total, but if mines and projects are shut down and delayed, total output could be lower, creating scarcity and weighing on investor sentiment.

Global production expectations for tungsten were also reduced in late 2018, when Australian miner Wolf Minerals halted production at its Drakelands mine in England due to a bitter and prolonged winter coupled with ongoing funding issues.

According to Wolf, the site is home to the western world’s largest tungsten and tin deposit.

As Billing pointed out, “the closure of the Drakelands mine in England, while contributing to a shortfall in expected supply, has probably tempered investors’ enthusiasm for tungsten aspirants.”

For Thor Mining, 2018 brought some positive share price movement following the release of a definitive feasibility study (DFS).

“The completion of the DFS, combined with the acquisition of interests in multiple nearby tungsten deposits at Bonya, was a major step forward for Thor Mining,” said Billing. “While our share price rallied briefly on the news, it settled back again relatively quickly, possibly reflecting general weakness in junior resource stocks in London.”

Tungsten outlook 2019: The year ahead

As 2018 draws to a close, the tungsten market is still slightly depressed, with APT prices sitting at US$275 to US$295 on December 3. However, a surge in demand in the new year could offset this trend and help prices recover.

Billing believes tungsten could repeat the price trend it took in the early half of 2018.

“We sense that for at least the first half of 2019, the market will be short of tungsten and prices should strengthen. If global economic conditions remain strong then this shortfall may continue for awhile; however, any continued weakness in oil prices may affect drilling and therefore tungsten consumption.”

China will continue to be the top tungsten producer in 2019, as well as the country with the most tungsten consumption, with other countries slowly increasing their tungsten demand.

When asked what advice he offers investor regarding investing in the metal, Billing said, “[t]ungsten pricing is volatile and while prices were okay in 2018, and may improve, history says that they will also drop, at times quite significantly. It is, however, a strategic commodity with very little potential substitution and should form part of any portfolio.”

When looking for a potential tungsten stock to invest in he said that savvy investors should look for companies that are near production, with low production costs.

For investors interested in learning more about this critical metal, INN has put together a brief overview on how to get started on tungsten investing. Click here to read more.

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

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.