Roskill: Tungsten stability under threat amid COVID-19 uncertainty

Tungsten prices have enjoyed a relatively long stretch of stability since October 2019. This followed a disappointing 2019 for tungsten demand, but a marked improvement to industry sentiment as a result of the successful auction of the Fanya Metals Exchange ammonium paratungstate (APT) stockpiles in September 2019. The industrial metal may be set for a new period of volatility, however: much of Europe, North America and elsewhere remains under lockdown with varying restrictions on businesses in order to halt the spread of the COVID-19 pandemic. Meanwhile, in China, industry appears to be returning to normality.In its new Tungsten: Outlook to 2029 report, Roskill forecasts tungsten demand to rise by over 1%py between 2019 and 2029, driven by increased consumption in the cemented carbides and steel and alloys sectors.


London, UK, April 22, 2020 (GLOBE NEWSWIRE) -- Concentrate prices begin to falter, whilst APT price remains stable amid COVID-19 uncertainty

Tungsten prices recovered toward the end of 2019, following a period of decline through late 2018 and much of 2019. Widescale environmental clampdowns in China led to buoyant prices across 2017 and early 2018, as many large-scale tungsten operations were forced into suspension, with European FOB APT prices peaking at US$352/mtu in June 2018. As many of these operations returned to production from late 2018 and demand began to stutter in the Chinese automotive sector, prices slumped into 2019, reaching a floor of US$200/mtu in September 2019.

The auction for APT inventories, previously held by Fanya, halted the price slide in September 2019. The auction and high winning bid immediately spurred a jump in the European APT price to US$240/mtu, amid improved market sentiment. The APT price has remained stable into mid-April 2020, with little impact thus far on spot prices from COVID-19 supply chain disruptions. However, as much of the world enters lockdown periods to prevent the spread of the pandemic, Chinese concentrate prices have begun to show downside weakness, as feedstock consumption at domestic APT smelters slows.


Cemented carbides and steel and alloys to lead tungsten demand growth 

Roskill estimates that the cemented carbide sector accounted for more than 55% of overall tungsten consumption in 2019. Demand for tungsten is anticipated to increase by 1.5%py over the next decade, thanks to rising demand in China and countries with less mature tungsten markets such as South Korea. The growth in cemented carbides is set to be relatively flat due to the continued rise of the electric vehicle (EV) market, with the automotive sector ultimately consuming around a third of tungsten units in 2019. With many fewer components required in EVs, there is substantially lower use of cemented carbide tools used in their production. This trend, however, is set to be offset by a larger requirement for cemented carbide tools in other sectors, such as aerospace, marine and mining.

Over the coming decade, the highest growth rate is set to be seen in the steel and alloys sector, with demand for tungsten anticipated to increase by 2.5%py. In 2019, the steel and alloys sector accounted for just under a quarter of overall tungsten consumption, and this share is set to rise further by 2029. Historically the steel and alloys market has been largely accounted for by use of tungsten in tool steels (including high-speed steel), and tool steels are expected to remain the primary user of tungsten in this segment. However, very strong aerospace demand is likely to be beneficial for tungsten-containing superalloys and tungsten heavy alloys. Tungsten use in superalloys is set to show considerable growth, by 8.0%py, in the period to 2029.

Tungsten use in chemical applications is another segment anticipated to grow over the coming decade. Catalysts and semiconductor markets represented the two largest markets for tungsten chemicals in 2019 and are likely to be the main drivers of this tungsten segment in the period to 2029, linked to environmental regulations and electronics.


Primary supply to grow outside of China

For the last decade primary supply has lagged some way behind demand, enabling large stockpiles to be drawn down and also requiring considerable supply of secondary tungsten to meet demand. China accounts for a substantial proportion of primary supply, accounting for over 80% in 2019. A number of large state-owned mines are facing depleting ore grades, which is likely to lead to lower output from existing operations over the next decade. Roskill anticipates China’s market share to drop to below 72% by 2029, unless new operations can come online to offset the fall from depleted assets.

Two large-scale Spanish tungsten mines came online in 2019; La Parrilla (controlled by W Resources) and Barruecopardo (controlled by Saloro). Both are looking to ramp up production in the coming years, with output expected to peak in the mid-2020s. Production from both operations is scheduled to contribute over 3.0ktpy of contained tungsten. A further three projects in Spain are at the financing and permitting stage.

Australia currently has two small-scale operations in production, with the most recent coming online in 2019. By the mid-2020s a further five projects, that are currently at financing and permitting stage, may join the ranks of global mine producers and add over 5.0ktpy capacity.

Additional large-scale advanced projects that are projected to come online in the near-term include Sangdong in South Korea (3.6ktpy W capacity), under development by Almonty Industries, and Sisson in Canada (5.6ktpy W), owned by Northcliff Resources.

Roskill’s Tungsten: Outlook to 2029 report was published in April 2020 and details trends in tungsten production, consumption, trade and prices, as well as profiling the major industry players.