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Tungsten to see 'horrendous' deficit on higher Chinese consumption
Clementine Wallop
April 02, 2008
The tungsten market will see a growing deficit and higher prices in thecoming years on higher Chinese domestic consumption and good demand, marketparticipants said on Tuesday.
Growing domestic consumption in China and a lack of new production coming onstream in the next few years will tighten the market and push prices higher,producers and analysts said at Global Capital Forum’s tungsten and molybdenumconference.
“Supply is going to struggle…everything has pointed in the same directionover the last few years…The next five to ten years will be a boom for thetungsten market,� said David Matousek, head of corporate development atPlayfair Mining, a prospective tungsten producer based inCanada.
“If you look at other commodities, we take the position thattungsten is really yet to reach where it’s meant to go,� he said in hispresentation.
The global tungsten deficit could be as much as 17,500 tonnes by 2010,Matousek suggested.
“There is going to be a pretty horrendous deficit further down the line,�said Jack Marr, director of Geodex Minerals in his presentation, adding that itwould take “every tungsten wannabe� to come into production to fill the gapbetween supply and demand that he is expecting in 2010 and 2011.
The major factor underpinning the market will be falling Chinese exports as aresult of lower quotas and growing domestic consumption, delegates said.
The Chinese are “not totally confident� that their reserves will beadequate to meet demand in the future, said CRU Strategies director ChristopherStobart in his presentation.
“Chinese exports will no longer depressthe market,� he said, while Marr suggested that exports may “dry upaltogether� in the next few years.
The recent ban on foreign investment in the Chinese tungsten industry in abid to “protect and conserve� the domestic producers will add to the upwardpressure, Stobart said, adding that tungsten has not attracted the sameattention as nickel and cobalt despite enjoying the same price rise inpercentage terms since 1995.
Supply from the Defense Logisitics Agency (DLA) of around 2,500 tpy oftungsten concentrate will not put downward pressure on prices, delegatesinsisted.
“We don’t see [the DLA] as a big threat to the market,� Stobartsaid.
Although prices have soared since 2000, non-Chinese producers have been slowto react by investing in tungsten projects in the rest of the world, Stobartsaid.
Ammonium paratungstate (APT) has risen to $255-257 per mtucurrently from $51-55 per mtu at the beginning of 2000, according toMB’s pricing archive.
APT prices could exceed $300 per mtu “in themedium term not the long term�, Andrew Haslam of Vital Metals said.
Demand for tungsten will stay strong with growth of 3-7% per year even as theglobal financial markets weaken as a result of the US credit crunch, marketparticipants said.
Although consumption from the lightbulb industry may fall, presenters agreedthat demand from the tools sector will be robust enough to shrug off concernsover the global economy.
Tungsten demand, which is currently around 80,000 tpy, could exceed 122,000tpy by 2010, Haslam said.
The credit crunch may be a “blessing in disguise� for prices and existingproducers, as new, non-Chinese producers struggle to find financing from thewestern banks, thereby maintaining the market deficit, Matousek tolddelegates.
But he cautioned that Chinese steelmakers and tungsten producers may use theweakness in the western markets to buy up non-Chinese tungsten operations.
“The credit crunch will open the door for Asian conglomerates…to providefinance for companies outside China,� he said.
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