Minor & Light Metals / Tungsten: Market Outlook to 2016, 10th edition 2011

The tungsten market in the 1990s was characterised by oversupply from China and low prices, which meant that most western producers ceased production as prices were well below costs of production. However, in 2000 the Chinese government began the process of controlling its tungsten industry through the imposition of production and export quotas, and the removal of export rebates on tungsten products.

Over the years of excess supply, stockpiles of tungsten were built up by producers and also governmental organisations. These stockpiles overhung the tungsten market and tended to act as a brake on price rises. Most of the material contained in these stockpiles has now been sold and trends in tungsten prices have correlated more closely to the underlying supply/demand fundamentals since 2005/2006. Tungsten prices have risen strongly throughout 2010 and most of 2011, as most of the economies outside China recovered from the credit crisis-induced recession and demand for tungsten increased in parallel. At the end of September 2011, prices for Chinese APT had reached US$450-460/mtu, compared to US$330/mtu at the beginning of the year and US$200/mtu at the beginning of 2010. APT prices are now well above the levels that were last seen in June 2005, when APT peaked at US$300/mtu.

The outlook for the tungsten market is relatively positive as demand is expected to increase at almost 6%py to 2016, driven on by strong growth in China. Supply of tungsten will struggle to match demand growth at least until 2013, when some of the potential tungsten-producing projects are expected to begin production. However, any delays in commissioning of these projects would quickly see a growing deficit in the market with a resultant upward pressure on prices.

Very few of the significant new tungsten projects are expected to deliver any substantial tonnages of tungsten in 2012, so the market will be relying on existing producers to cope with any growth in demand. As a result, Roskill predicts a further tightening in supplies of tungsten and, therefore, further price rises, with an average APT price of US$475/mtu. It is possible that the market will test the US$500/mtu level at some point in 2012. Prices are then expected to ease between 2013 and 2015 as the bulk of planned new tungsten production capacity is expected to enter the market.

Get accurate answers from independent experts

• Where are the potential new sources of tungsten located and how far advanced are the major projects?

• What are the Chinese government’s future plans regarding production and exports quotas

• What is the outlook for the supply / demand balance in the tungsten market and for tungsten prices to 2016?

• How does China’s continuing dominance of supply affect the market?