When it comes to electronics, silicon and lithium are the first to come to mind. Tungsten is associated with incandescent light bulbs, but it plays an equally important role in the electronics industry due to its high thermal and electrical conductivity. It is used in the production of diodes, transistors, superconductors, and X-ray tubes. It is not surprising that supply constraints on tungsten have a significant impact on a wide range of industries.
Image source: periodic-table.app
China accounts for more than 80 percent of global tungsten production, putting the country in a strategically advantageous position amid escalating tensions with the United States. On February 4, China’s Ministry of Commerce and General Administration of Customs announced export controls on tungsten, tellurium, bismuth, molybdenum, indium, and other rare metals. China’s move was expected to hurt U.S. industry, but it appears that businesses in Japan and South Korea will also be hit hard.
Tungsten is a key raw material for the nuclear power, military, aerospace and semiconductor industries. Chemical compounds of tungsten are used in catalysts, inorganic pigments and high-temperature lubricants. Its high melting point also makes it an ideal material for use in electrode contacts in high-temperature applications.
China’s export controls have shocked international companies, who are now actively seeking alternative sources of tungsten, which is not easy to achieve given its production statistics (data for 2022, thousands of tons in terms of pure metal):
- China — 71;
- Vietnam — 4.8;
- RF – 2.3;
- Bolivia — 1.4;
- Rwanda — 1.1;
- Austria — 0.9;
- Spain — 0.7;
- Portugal — 0.5;
- Others (North Korea, Brazil, etc.) – 1.4.
Currently, only 18 companies in China are allowed to export tungsten raw materials. Lianyou Metals, one of the top five exporters, has increased the price of sodium tungstate, a key raw material for tungsten products, by almost 10% since January. This, taking into account the supply chain and inventory, will have an impact on related industries in March. The company does not rule out further price increases.
Image source: zavody.rf
According to analysts, prices in the international market have not yet experienced significant volatility as the market is still monitoring the situation. China’s export application review process takes six to eight weeks, and currently no company has applied for export qualification. Chinese tungsten is expected to be hard to find in the global market until the end of April. Industry participants believe that China’s requirement for companies to re-submit individual export applications specifying the target country marks a departure from the previous system of annual quota management.
China’s export controls were initially thought to be aimed primarily at the United States. However, experts say the United States is not a major recipient of tungsten and its compounds from China. The United States gets its main supplies from Canada, and for some American companies, the 25 percent tariff on Canadian imports has become a bigger problem than China’s recent export controls. Large American companies still buy certain tungsten compounds from China, especially sodium tungstate and tungsten oxide, but overall imports have been gradually declining in recent years.
The export control policies will primarily affect Japan and South Korea, which not only provide high demand for Chinese tungsten but also supply the United States with tungsten-related products. This shift in focus highlights the complex dynamics of global supply chains and the far-reaching implications of China’s strategic decisions.
A surge in demand is expected to significantly increase profitability by the end of the first quarter, primarily due to rising sodium tungstate prices. However, fluctuations in raw material costs, especially from processing, remain limited, which contributes to additional stabilization of price dynamics.
Industry experts believe that China’s long-term strategy is to export high-value-added products rather than raw materials. Although the price of raw tungsten is high, its value can increase many times over after it is processed into advanced products. In this way, China hopes to improve the competitiveness of its industry and encourage international companies to set up processing plants in the country rather than simply exporting raw materials.