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. However, while the metal has many key uses, the tungsten market has been quite turbulent for the last several years. Low prices have led to less output in some parts of the world.
China dominates the tungsten-mining space, according to the US Geological Survey. Production of tungsten concentrate outside the Asian nation accounts for less than 20 percent of total global output. In China, the government has limited the number of mining and export licenses for tungsten, imposed quotas on concentrate production and placed constraints on mining and processing.
Despite those output challenges in the biggest tungsten-producing country, world tungsten output came to 84,000 metric tons in 2020, nearly on par with the 83,800 metric tons produced in 2019.
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 more under control. In fact, there are already signs of rising tungsten prices in European markets.
Developments in infrastructure, 5G telecommunications and railroad construction projects are expected to boost demand for tungsten, especially in China. The Chinese government invested nearly US$8 trillion in new infrastructure projects in 2020, and these will require the critical metal.
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 ways to invest in tungsten.
Ways 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 2020, the country produced 69,000 metric tons of the metal, far ahead of the 4,300 metric tons produced in Vietnam, the world’s second largest tungsten producer. In terms of reserves, China also leads the pack with 1.9 million metric tons; Russia is in second place with 400,000 metric tons.
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 the US has added tungsten to a list of 35 minerals deemed critical to American 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 and automotive industries, and can also be found in oil operations, as well as 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.
Ways to invest in tungsten: Getting started
Some investors who believe tungsten prices will rise in 2021 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 ways to invest in tungsten may want to check out the Investing News Network’s 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.