U.S. needs more tungsten. China is a major supplier of the critical metal

BEIJING — China dominates the availability chain for most of the world’s crucial minerals, however to date it is held off on sweeping restrictions on at the least one: tungsten.

The metallic is almost as laborious as diamond and has a excessive power density. That is made tungsten an necessary materials in weapons, autos, electrical automotive batteries, semiconductors and industrial reducing machines. Chipmakers comparable to Taiwan Semiconductor Manufacturing Firm and Nvidia each use the metallic.

“I do not count on any saber-rattling over tungsten,” stated Lewis Black, CEO of Canada-based Almonty Industries, which is spending at the least $75 million to reopen a tungsten mine in South Korea later this yr.

“If you happen to get too belligerent about diversification, [it becomes a situation that’s] biting the hand that feeds you,” he stated, including that “tungsten has all the time been a diplomatic metallic.”

Whereas the Biden administration raised tariffs on imports of tungsten in Could, China this previous weekend didn’t embrace the metallic in new laws for enhancing its oversight of home uncommon earths manufacturing.

“The tariffs had been extra of a warning shot, as Biden solely put tariffs on three of the 25 strategic metals China exports,” Black stated.

“However China may not be too involved, as a result of the Chinese language authorities ignored the brand new tariffs, not like prior to now after they restricted some exports of uncommon earths. They fully ignored it as a result of the Chinese language don’t desire tensions to rise.”

Requested final month if China would retaliate to the newest U.S. tariffs on tungsten, China’s Ministry of Commerce spokesperson He Yadong did not announce countermeasures. As an alternative, he known as on the U.S. to take away the extra duties.

Commodity value reporting and analytics firm Fastmarkets identified earlier this yr that China has lowered nationwide manufacturing quotas for its tungsten mines as a consequence of environmental restrictions.

Nonetheless, Black expects his firm to profit from rising efforts to diversify away from China. Almonty claims the forthcoming mine in South Korea has the potential to provide 50% of the world’s ex-China tungsten provide.

Demand for non-Chinese language tungsten is already on the rise.

“We see within the U.S., in Europe, they ask their suppliers for a China-free provide chain,” stated Michael Dornhofer, founding father of metals consulting agency Unbiased Provide Enterprise Accomplice.

The U.S. REEShore Act — or Restoring Important Vitality and Safety Holdings Onshore for Uncommon Earths Act of 2022 — prohibits the usage of Chinese language tungsten in navy tools beginning in 2026, whereas the European Fee final yr prolonged tariffs on imported Chinese language tungsten carbide for an additional 5 years, Almonty Industries identified in a report.

The Home Choose Committee on the Strategic Competitors between the USA and the Chinese language Communist Get together final month introduced a brand new working group on the U.S. crucial minerals coverage.

Expectations for increased demand and restricted provides of tungsten have pushed costs to multi-year highs, though they’ve tapered off within the final a number of weeks.

Dornhofer stated in an interview in late Could that he was additionally seeing Chinese language consumers rising their tungsten purchases.

“For the reason that starting of this yr, they aren’t solely asking for Western focus, however they’re shopping for important volumes, paying much more than Western corporations are keen to pay,” he stated. “Positively [going to be] a sport changer.”

Again in January, U.S.-based analysis agency Macro Ops stated: “We’re approaching an inflection level in tungsten provide. The US will rapidly run out of stockpiled tungsten and flip from internet vendor to purchaser over the subsequent 12-18 months.”

The U.S. Bureau of Business and Safety on the Division of Commerce didn’t instantly reply to a CNBC request for touch upon this story.

Brandon Beylo, head of funding analysis at Macro Ops, informed CNBC in an electronic mail there are solely six corporations within the U.S. with capability to provide tungsten. He added that the U.S. hasn’t produced tungsten domestically since 2015, which means future U.S. provide should come from abroad.

He stated the agency does not personal tungsten-related shares, however that he is personally searching for methods to entry the bodily commodity. There aren’t any futures for buying and selling tungsten.

China dominates over 80% of the tungsten provide chain, though native manufacturing prices are rising because the mines age, in keeping with Argus, noting Chinese language imports of the metallic from North Korea, central Africa and Myanmar.

“This presents a chance for tasks outdoors China,” Mark Seddon, principal, consulting and analytics at Argus, stated in a June 28 webinar.

Different non-Chinese language corporations within the tungsten provide chain are going to South Korea.

In February, IMC Endmill, an affiliate of Warren Buffett-owned IMC Group, signed an settlement with the Daegu metropolis authorities for a 130 billion Korean gained ($93.6 million) funding in a tungsten powder manufacturing facility, in keeping with an area information report.

IMC Group didn’t instantly reply to CNBC’s request for remark.

China’s dominance in world crucial minerals provide chains has been constructed up over a number of a long time.

Dornhofer identified that efforts to provide tungsten outdoors of China have languished for years, together with plans for a mine in New Brunswick, Canada, that will have considerably elevated world tungsten capability.

All these tasks have been on the desk since 20 years in the past, he stated. “When folks inform you in two years, three years they are going to be in operation, it is a query of whether or not you imagine them. On the opposite [hand], the tungsten is within the floor. It is nonetheless there.”

Almonty claims to be the most important producer of tungsten outdoors China and proper now, primarily operates in Portugal and Spain. The forthcoming mine in Sangdong, South Korea, closed within the Nineties.

After the mine reopens later this yr, Black expects his firm will account for less than 7% or 8% of worldwide tungsten provide.

“We’re not crowding out any Chinese language,” he stated. “We do not intend to.”

“Now if we will produce 30% to 40%, I am taking a battle with China, which would not be a wise factor to do.”