China Molybdenum Wining APT Auction Stabilized Tungsten Market

With China Molybdenum Co winning the auction for ammonium paratungstate (APT) held in inventory on the collapsed Fanya Metal Exchange, market participants anticipate this is a positive sign for the tungsten market with China Molybdenum unlikely to offload the material anytime soon if it wants to make a profit.

China Moly beat rival bidder Chinese Government-owned Minmetals with its US$461 million offer after the Chinese Government hosted a series of auctions to offload inventory on the collapsed exchange.

The bid saw China Moly take charge of about 28,336t of APT which is an intermediate tungsten product comprising 88.5% tungsten oxide.

According to Roskill, China Moly paid about RMB115,333/t (US$183/mtu) for the APT, which was a premium to APT spot prices in China at the time and exceeded most participants’ expectations.

Speaking with Small Caps, King Island Scheelite (ASX:KIS) executive chairman Johann Jacobs said the purchase would have a positive affect on the tungsten market.

He pointed out the amount of APT China Moly scooped up was about 25-30% of annual worldwide production. When it was made public the Fanya APT would be auctioned off, Mr Jacobs said the APT price plunged from US$280-290/mtu to hover around US$200/mtu.

He said the previously unknown fate for the huge chunk of APT inventory had created a cloud over the market – with fears the eventual buyer would flood the small tungsten space with excess inventory.

However, Mr Jacobs and other participants believe China Moly will not take this route. Mr Jacobs anticipates China Moly will mostly keep the APT and use it internally.

He said he believed this will bump up the APT floor price to around US$250-270/mtu, with the industry estimating China’s break-even APT price is around U$220/mtu.

Similar to Mr Jacobs, Roskill pointed out China Moly now has a strong bargaining hand on the supply side of the market with the Fanya stock purchase and its own Sandaozhuang scheelite mine, which is the biggest in the world.

With such a strong bargaining hand, the analyst expects China Moly will hold off on selling stocks until it can make a decent profit.

• < Prev
• Next >