Foreign Media: China Decides Tungsten Peaks And Valleys

China's tungsten market in 2017 demand improvement and price rise is a welcome change, so far, in the price trend and price bottom line, the Chinese market is still optimistic about this view. (source: London Metal Bulletin)

In the world's tungsten supply chain, the benchmark price of ammonium paratungstate (APT) was quoted in Rotterdam on December 29, 2017 at $295-300 per tonne of MTU and CIF Rotterdam. By contrast, the same price in 2016 was between $187 and $198 a tonne, which was considered to be lower than the cost of most major tungsten mines outside China.

In the summer of 2017, tungsten prices ushered in a precious wave of heat, the international APT reference price soared, reaching a 34-month high of $310-335 in Rotterdam MTU in September. Nevertheless, downstream orders from tungsten producers did not weaken in 2017, but increased significantly, APT spot demand stabilized, and some tungsten mines in Europe began to turn losses into profits, but it must be said that China is still the key to price trends and direction.

China tightened the market sharply in 2017, and European buyers were forced to pay high prices to ensure the necessary tungsten intermediates. In the summer of 2017, China's environmental inspectors arrived in the tungsten-producing provinces of Hunan and Jiangxi. These inspections forced the closure of smaller mines and implemented cost-effective measures aimed at reducing the environmental impact of tungsten production in China over the long term, resulting in a decrease in tungsten production and an increase in production costs.

From the past to the future, China's efforts to curb pollution have become a focus, even as environmental inspectors leave important tungsten-producing provinces. At the same time, China's tungsten mining companies are also rising production costs, and their break-even costs are rising. As a result, although prices have fallen from their September highs, their summer gains are still large, with overall gains of about 50% in 2017.

According to Chinese traders and manufacturers, the APT price will be supported at more than US $270 per ton. Since the second half of this year, China's profit and loss balance costs have been significantly higher. There are signs that producers need to take advantage of higher prices to cope with additional costs, such as rising labor costs, the cancellation of government subsidies, and new environmental measures.

Demand growth also played a supporting role in tungsten prices in 2017. Despite rising tungsten costs in China, global demand exceeded conservative estimates at the end of 2016, the aviation and defense industries were strong, oil and gas remained strong, and there was no negative impact on demand for tungsten products. Customers are now more confident about forward-looking orders.

Although Western producers still tend to maintain control of the supply chain by purchasing concentrates from APTs and intermediaries, upstream supply remains tight. As a result, Western buyers have found that to increase their inventory of intermediate goods, China remains an unavoidable major player in the market, and China determines the highs and lows of tungsten.

European prices were also supported in the fourth quarter as China played a crucial role in supplying APT to the rest of the world. Therefore, higher prices seem to have to continue. But just as the Chinese do not want global output growth, want Chinese producers to take the initiative to cut APT prices below $250? From the higher cost now facing, this seems to be an impossible task.

In addition to rising production costs, the new environmental tax came into effect in January, and APT costs will increase by about $300 per tonne. Do we want to return to the era of US $200 per ton? This does not seem feasible. (China Tungsten online: Weiping)

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