Tungsten Market Looks to Rebalance in 2017
For the last 20 years China has been the world’s largest consumer of tungsten. Over this period its share of world tungsten use has increased substantially; from just under 30% in 1996 to nearly 60% in 2016. Chinese consumption has continued to grow in the face of contracting markets in the rest of the world. The country’s tungsten use increased by nearly 8%py between 2008 and 2016, but it was the only main consuming country to record growth, with the exception of Russia. As a result, world consumption grew by around 3%py over the period, reaching just over 100,000t contained W in 2016.
Chinese tungsten supply has also grown in line with its consumption. The country is the main producer of primary tungsten, accounting for just under 80% of output in 2016, and also contributes a few thousand tonnes per year to secondary tungsten supply. Very little mine output is exported (<1,000tpy contained W) and domestic mine supply is supplemented with imports, generally in a range of 2,000-5,000tpy of contained W. Instead, China has focused on increasing its exports of value-added tungsten products. The proportion of exports accounted for by the main intermediate, ammonium paratungstate (APT), has decreased since 2008 along with exports of tungsten products such as oxide and metal. Meanwhile, production and export of goods such as mixed metal carbides and cemented carbides has increased as the country has repositioned itself as a supplier of higher value tungsten products to the world market. New tungsten supply
New mine developers have looked to offer a non-Chinese alternative to the tungsten concentrates market. A significant producer is Vietnam-based Nui Phao Mining Company, a subsidiary of Masan Resources, which began full commercial production from the polymetallic Nui Phao project in March 2014. Nui Phao produces tungsten, fluorspar, bismuth and copper, with output in 2016 estimated at 4,300t contained W. Tungsten output from the mine is sent to Masan’s 51% owned subsidiary, Nui Phao – H.C Starck Tungsten Chemicals Manufacturing, which began operations in 2015. Capacity of the plant is 6,500tpy WO3 and the facility can produce APT, tungsten blue oxide and tungsten yellow oxide.
Elsewhere in the world, Australian-headquartered Wolf Minerals commissioned the Drakelands tungsten-tin mine at Hemerdon in Devon, UK, in 2015. Nearly all mine output from Drakelands is exported; Wolf has offtake agreements with Global Tungsten & Powders of the USA and Wolfram Bergbau in Austria that account for 80% of mine output.
There are tens of tungsten mine projects currently under development and in the period to 2026, Roskill expects that more than 10,000tpy (contained W) will be successfully brought online. Most projects are focused in Australia, Spain and Canada, and if all come to fruition then the landscape for primary tungsten supply could shift to much higher contributions from Oceania, North America and Europe.
One such developer is Canada-headquartered Almonty Industries, which has undertaken a series of acquisitions since listing on the TSX Venture Exchange in September 2011. In 2011, it purchased the Los Santos tungsten mine in Spain from Heemskirk, followed by the Wolfram Camp mine in Australia in September 2014, Woulfe Mining Corp. (which holds the Sangdong project in South Korea) in September 2015, the Panasqueira mine in Portugal in January 2016, 51% of the Valtreixal project in Spain in June 2016, and the remainder of Valtreixal in January 2017. Almonty produced an estimated 1,350t (contained W) of concentrates in 2016 and its Sangdong and Valtreixal projects have the potential to add another few thousand tonnes to global primary tungsten output in the coming years.
Finally, one of the more advanced tungsten mine projects currently under development is the Barruecopardo project in Spain, operated by Saloro SLU – a subsidiary of Barruecopardo JV (70% owned by Oaktree Capital Management and 30% by Ormonde Mining). Saloro is targeting production of 2,600tpy of WO3 (2,050tpy contained W) over an initial nine-year mine life, starting in 2018.
In terms of end uses, cemented carbides remained the largest consuming sector in 2016 at more than 50% of total demand. While consumption has continued to grow in the last decade, it has not kept pace with steels and alloys – this sector grew by more than 4%py between 2008 and 2016, mainly propelled by China.
In cemented carbide markets, recent trends have included development of nano-grained products. Nano-sized hardmetals show both improved hardness and fracture toughness. Applications for nano-sized hardmetals include micro tools, for example in drilling printed circuit boards (PCBs). Yet not all focus has been on nano-sized materials; for example, extremely coarse tungsten carbide (WC) and cast WC grades have been successfully used in high-performance drilling tools for oil and gas exploitation, mining and road construction.
One challenge for raw material development is the design of WC powders suitable for use in additive manufacturing – also known as 3D printing. AM using tungsten materials is still at an early stage, with the main challenges including the high melting points of W (3,422°C) and WC (2,870°C); plus the high cost and limited raw material availability.
Steels and alloys continued to be the second largest end use in 2016, primarily in high speed steels and other tool steels. Roughly half of all tool steels consumption is from the transportation sector. In particular, vehicle manufacture dominates consumption of tool steels. The sector has therefore benefitted from the recovery in motor vehicle production since 2010. China is the world’s largest manufacturer of motor vehicles, accounting for an estimated 25.8M units in 2016 – or some 31% of the total (93M).
In the mill products sector, consumption of tungsten is estimated to have peaked at over 15,000t contained W in 2012 but has been in decline since this time – primarily because of lower tungsten use in lamps, as uptake of light emitting diodes (LEDs) has increased.
In the period to 2026, LED lamps are likely to gain a much larger share of the global market as phase-out of incandescent bulbs continues and LED prices come into parity with electrical discharge lamps such as compact fluorescent lamps (CFLs). LED lamps previously varied in light colour, efficiency and colour rendering, but such issues appear to have been resolved. LEDs could account for as much as 95% of the lighting market by 2026.
The tungsten market was in a state of oversupply in 2014 to mid-2016, which led to the build up of stocks in both concentrates and APT. In 2017, primary tungsten supply is expected to decline again as the effects of prior mine closures in China and the rest of the world make their impact. This should help the market to rebalance as stocks are drawn down, leading to stabilising prices.
Longer term, the market is expected to enter a period of improved prices, which could incentivise mothballed operations and new projects to come online, in addition to existing operations ramping up output.
As a result, the market is forecast to move into a slight surplus, therefore increasing stocks again. New projects and ramp up from existing operations is likely to contribute to further stockbuilding at the start of the next decade, which would lead to a price fall. Another period of reduced supply would likely ensue, again causing stocks to fall and prices to improve towards 2026.