Pictured is a stone containing tungsten ore inside a mine in Germany operated by Saxony Minerals and Exploration.
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BEIJING — China dominates the world’s supply chains for many of the world’s key minerals, but so far the country has failed to impose comprehensive restrictions on at least one: tungsten.
Metal is almost as hard as diamond and has a high energy density. That makes tungsten an important material in weapons, cars, electric vehicle batteries, semiconductors and industrial cutting machines. Chipmakers such as Taiwan Semiconductor Manufacturing Company And Nvidia Both use metal.
“I don’t expect any threatening moves on tungsten,” said Lewis Black, CEO of Canada-based Almonty Industries, which is spending at least $75 million to reopen a tungsten mine in South Korea later this year.
“If you are too aggressive about diversification, [it becomes a situation that’s] “Tungsten has always been a diplomatic metal,” he said, adding that “it bites the hand that feeds it.”
While the Biden administration increase import tax on tungsten In May, China did not import metals last weekend. new rules to strengthen supervision of domestic rare earth production activities.
But China may not be too concerned, because the Chinese government has ignored the new tariffs… They have completely ignored them because the Chinese do not want tensions to increase.
Lewis Black
CEO of Almonty
“This tariff is more of a warning, as Biden only imposed tariffs on three of the 25 strategic metals that China exports,” Black said.
“But China may not be too worried, because the Chinese government has ignored the new tariffs, unlike before when they restricted the export of certain rare earths. They completely ignored it because China did not want tensions to increase.”
Asked last month whether China would retaliate against the latest US tariffs on tungsten, Chinese Commerce Ministry spokesman He Yadong did not announce countermeasures. Instead, he called on the US to remove the additional tariffs.
Commodity price analysis and reporting company Fastmarkets points out Earlier this year, China reduced national production quotas for its tungsten mines due to environmental restrictions.
Diversifying away from China
However, Black hopes his company will benefit from growing efforts to diversify away from China. Almonty claims that the upcoming mine in South Korea has the potential to produce 50% of the world’s tungsten supply outside of China.
Non-Chinese demand for tungsten is growing.
“We’re seeing in the US and Europe that they’re asking their suppliers to build supply chains that don’t include China,” said Michael Dornhofer, founder of metals consultancy Independent Supply Business Partners.
The US REEShore Act — or the Restoring Critical Energy and Onshore Security for Rare Earths Act of 2022 — ban on use of Chinese tungsten in military equipment starting in 2026, while the European Commission last year expanded tariffs Almonty Industries indicated in a report that it will continue to import tungsten carbide from China for another five years.
House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party last month announced a new working group on US critical minerals policy.
Tungsten prices skyrocket
Expectations of higher demand and limited tungsten supplies have pushed prices to multi-year highs, although prices have eased in recent weeks.
Dornhofer said in an interview in late May that he also saw Chinese buyers ramping up purchases of tungsten.
“Since the beginning of this year, they have not only asked for Western concentrates but have been buying large volumes, paying even more than Western companies are willing to pay,” he said. “Absolutely. [going to be] a game changer.”
In January, US-based research firm Macro Ops said: “We are approaching an inflection point in tungsten supply. The US will rapidly deplete its tungsten reserves and transition from a net seller to a net buyer over the next 12-18 months.”
The U.S. Commerce Department’s Bureau of Industry and Security did not immediately respond to CNBC’s request for comment on this story.
Brandon Beylo, director of investment research at Macro Ops, told CNBC via email that there are only six companies in the United States with tungsten production capacity. He added that the United States has not produced tungsten domestically since 2015, meaning future U.S. supplies will have to come from abroad.
He said the company does not own any tungsten-related stocks, but he is personally looking for exposure to the physical commodity. There are no futures contracts for trading tungsten.
Other tungsten players will come to Korea
China accounts for more than 80% of the tungsten supply chain, although local production costs are rising as mines age, according to Argus, noting that China imports the metal from North Korea, Central Africa and Myanmar.
“This opens up opportunities for projects outside of China,” Mark Seddon, director of consultancy and analysis at Argus, said in a Webinar June 28.
Other non-Chinese companies in the tungsten supply chain will shift to South Korea.
In February, IMC Endmill, an affiliate of Warren Buffett-owned IMC Group, signed an agreement with the Daegu city government to invest 130 billion South Korean won ($93.6 million) in a tungsten powder production facility, according to a local news report.
IMC Group did not immediately respond to CNBC’s request for comment.
China’s dominance in the global supply chain of critical minerals has been built over decades.
Dornhofer pointed out that efforts to produce tungsten outside of China have been stalled for years, including plans to build a mine in New Brunswick, Canada, which would have significantly increased global tungsten capacity.
All these projects have been discussed for 20 years, he said. “When people tell you that in two years, three years they will be operational, the question is whether you believe them or not. On the other hand, [hand]The tungsten is still in the ground. It’s still there.”
Almonty claims to be the largest tungsten producer outside of China and currently operates mainly in Portugal and Spain. Its upcoming mine in Sangdong, South Korea, closed in the 1990s.
Once the mine reopens later this year, Black expects his company to account for just 7% or 8% of global tungsten supply.
“We are not excluding any Chinese,” he said. “We have no intention of doing so.”
“Now if we produce 30% to 40%, I will have to fight China, and that is not wise.”
