And Yet Another Rising Cost Metal…

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For years tungsten supply and demand used to hang in a balance if you will. This widely used but often overlooked metal featured as a significant cost inflator. Tungsten has been considered a strategic metal due to its use in cemented carbide parts for wear resistant applications such as drilling, mining and metalworking. In addition, it is an important constituent in heating and lighting elements, welding, the production of super-alloys and armor piercing ammunition. Consequently tungsten has been considered a metal of strategic importance for many western economies but now other countries are waking up to the rising demand and limited supply situation. Notably China – both the world’s largest producer and consumer – has imposed export taxes on tungsten concentrates and refined metal, reducing exports and increasing imports. Smaller Chinese mines have become depleted and the authorities are seeking to secure resources to meet growing domestic demand.

As prices have risen, new and previously worked mines have come back into the fold. Recent reports shed light on the future of tungsten and evaluate the likely developments. The most comprehensive was GBRM’s update on world supply and demand late last year and their findings make interesting reading. Paraphrased from the report in

1. Over the next five years global consumption of tungsten metal is expected to increase by 22,000 to almost 82,000 tons of primary metal assuming scrap levels can be maintained at some 21,000 tons

2. No major new production has been brought on stream in recent years, apart from the restart of the CanTung mine in 2005, and although many mines have been enhanced no new production is expected until at least late 2009

3. Driven by rising operating costs new mines will need significantly higher metal prices before new mine development can be justified

4. China has not only curtailed its domestic mining programs but has now become a significant importer of tungsten concentrates and tungsten scrap

5. Global prices for APT (ammonium paratungstate – most tungsten concentrates are processed chemically to APT) are expected to reach $300/metric ton unit – a 25% increase over the current pricing level

6. Apart from CanTung almost no tungsten concentrates are currently produced in US dollar economies, so that even if the US dollar continues to decline, the global market price for concentrates and APT will rise just to reflect the depreciating currency

So if demand is going to increase as supply is reduced prices will inevitably rise as new metal availability tightens. Several projects are under evaluation. The Moina multi metal deposit in northern Tasmania is undergoing additional sampling and assaying in an attempt to establish the potential for what could be a significant new source although the Tungsten content on its own will not currently be sufficient to justify the mine.

60% of tungsten consumption is in carbide cutting tools in which it is combined with carbon to form a tungsten carbide, often in a matrix with cobalt.

Consequently, machine shops can expect to see cutting and machining inserts to increase in cost in the year ahead, regrettably with few viable alternatives. Not only does tungsten carbide last longer than standard high speed machine tools, it often provides a better quality finish. Though demand may ease in North America this year limiting prices increases in the short term, manufacturing is proving surprisingly resilient to the housing downturn and credit crunch, helped by strong exports. Expect tungsten prices to rise and stay high for the next couple of years.

–Stuart Burns

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