Sharp Tungsten Price Increase Analysis (I)

Tungsten Concentrate Cost Composition in Micro Aspects

Tungsten is advantageous resource in China. Tungsten reserve in China accounts for 70%, which ranks the first place in the world. According to yearly average data, tungsten exploration and supply amount account for 80% of total global output. 

However, for a long time, tungsten resource price in and abroad is affected by market, industrial policy and international trading regulatory and is in a sluggish situation. It results in the ingenerated rare resource is sold in low price, far below its cost.

Recently there is a sharp tungsten price increase, the market price is fluctant. Many clients asked for the price trend and situation. Hereby we make a overall analysis for tungsten concentrate cost and price, and future price trend from the strategic prospect.

1. Tungsten Products Price Composition

Tungsten concentrate cost and price are basic of tungsten products, it determines the processed tungsten products and tungsten alloy products cost and price. So tungsten concentrate price is concentrated by marketers. This is only the concept of micro market cost and price.

Tungsten metallurgy factory micro costs and profit structure is:

A.tungsten concentrate price +B producing cost +C tax revenue +D profit = S sales income. The following is their connection:

A=tungsten concentrate price. It is a unfixable factor. On the one hand, tungsten concentrate price changes along with market. On the other hand, recycle rate of tungsten metallurgy factory. It is determined by technical capability and administration ability of enterprise.

B=Tungsten products producing cost. Generally speaking, it contains hydro and electrical power, labor, raw material, assistant material, In a certain period the cost is fixed, unless the increase of raw material price and labor cost.

C=Tax revenue. If all market participants can surrender tax revenue by law, then under uniform tax policy, tax revenue cost is fixed. After the basic complete of replacing business tax with value added tax in China, tax revenue of enterprises is fixed and is lowered gradually. However, with environmental inspection is getting severe and strict law enforcement, both environmental cost of tungsten mine and tungsten metallurgy factories are increasing. This is also a changeable part.

D=Profit. It is resulted by market price, enterprises’ manufacturing cost and tax revenue. If it is positive, then it shows the well operation situation of the enterprise. Otherwise it indicates the enterprise is facing possibility of bankruptcy. This factor can not be controlled by enterprise totally, but it determines its future.

We can conclude easily that D profit = S sales income - A.tungsten concentrate price -B producing cost -C tax revenue.

It is obvious that tungsten concentrate price is the main unfixable cost and affecting factor. Tungsten concentrate cost consists of both micro cost and policy cost, national strategic cost. Current tungsten concentrate price is RMB 100,000.00/ton, it only reflects the micro cost of tungsten concentrate. It is not the highest price of tungsten concentrate market, nor the macro and strategic view of the price which should be above RMB 150,000/ton.

To know more details of tungsten concentrate macro cost, please follow up on our site next week.

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