Tungsten Market Update: Mid-May Sensitivities and Strategic Insights

Analysis of latest tungsten market from Chinatungsten Online

In mid-May, the tungsten market is entering a relatively sensitive phase, with mixed opinions on the future. Those holding inventory are generally optimistic, but any minor fluctuation could trigger a new wave of price volatility, reminiscent of the butterfly effect in the Amazon rainforest.

Tungsten prices are stabilizing at high levels, leading to differing views on continued price increases. Some aggressive quotes have been observed, with tungsten ore prices at $22,142.9/ton, APT at $371.3/mtu and tungsten powder at $48,571.4/ton. However, most market participants are choosing to delay quotes and postpone deliveries, minimizing high-priced raw material inventory across various stages, resulting in reduced overall liquidity.

The recent entry of the Central Environmental Inspection Team into key tungsten resource supply bases has heightened supply chain tensions, a situation expected to be temporary. Despite concerns about potential market sentiment shifts at cycle turning points, expectations for national economic recovery, significant price increases in major economies, and the continued depreciation of the RMB suggest that significant short-term volatility in tungsten product prices is unlikely.

Value and Pricing Logic of Tungsten Products

The value of an item stems from its utility, while its price is determined by its marketability. Therefore, the price of a product is dictated by its utility and supply-demand dynamics. The strategic value of tungsten products is undeniable, but their price is the result of complex market negotiations. For current tungsten product resource holders, maintaining inventory already yields good returns. Even if prices dip in the short term, it won't significantly impact their gains. Conversely, selling now to realize profits means that if prices rise further, re-acquisition costs will offset the previous gains unless they exit the tungsten industry. A significant short-term drop would allow them to keep their profits and restock easily.

Cost Drivers of the Current Tungsten Price Increase

Recent statistics show that the CPI increased by 0.3% in the first quarter, well below the government's 3% target. This tenfold difference suggests that adjustments in water, electricity, and gas prices are indicative of government policy intentions, aimed at managing inflation expectations. The government does not gain directly from the price hikes of essential goods, except through tax revenue. Thus, driving key CPI factors up is a means of managing mild inflation expectations. Historically, achieving CPI targets has proven more challenging than GDP goals. According to IMF data, most government-implemented inflation expectations eventually lead to expected CPI increases.

Therefore, the macroeconomic environment shaped by moderate inflation expectations and realities, both domestically and internationally, forms the underlying logic for predicting increases in tungsten product prices.

Prices of tungsten products on May 15, 2024

Picture of tungsten needles 

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