Tungsten Market Outlook to 2016 Published
UK Roskill Information Services has published the 10th edition of its market forecast of the tungsten industry. Roskill outlines the historical position of the tungsten market from the 1990s when most western producers stopped production in the face of Chinese oversupply and low prices. In 2000, the Chinese government began the process of controlling its tungsten industry through the imposition of production and export quotas, and the removal of export rebates on tungsten products. Now as stockpiles have dwindled, tungsten seems to have strong market fundamentals.
Roskill states, “The onset of the global recession in 2009 saw tungsten prices fall sharply. Between the end of 2008 and beginning of 2010, prices for Chinese APT fell by just over 20%, with a similar fall in European prices. Of this price fall, approximately 92% took place in the first half of 2009, with the second half of the year showing early signs of stability. As the global economy started to improve from the fourth quarter of 2009, demand for tungsten also increased. The general improvement in economic sentiment saw prices increase steadily throughout 2010 and the rise in prices accelerated in 2011 as supply of tungsten had struggled to meet the recovery in demand.”
The company says that the relatively strong fundamental position in the tungsten market is illustrated when tungsten price trends are compared to trends in similar metals such as cobalt, nickel and molybdenum. The fall in tungsten prices was significantly smaller in 2009 than for the other metals , with tungsten prices dropping a maximum of 25%, compared to 70% for nickel, 68% for molybdenum and 43% for cobalt (index = January 2007). “The recovery in tungsten prices since the credit crisis and economic recession in 2009 has also been much stronger. While tungsten prices in July 2011 were at 180% of the level recorded in January 2007, prices for cobalt, nickel and molybdenum were all still below the levels of January 2007, with price indices of 64, 64 and 58 respectively. This would seem to be a clear indication that supply of tungsten is relatively tight as prices held up when demand was depressed and have increased strongly now that consumption of tungsten has recovered to pre-crisis levels,” notes Roskill.
“The credit crisis and the subsequent economic recession in 2009 meant that most companies with tungsten projects in development had to take stock
of the situation. Funding for any project was difficult and even now there is a lot of competition for a finite ‘pot’ of finance. As a result, the
timeline for development for most of the major tungsten projects slipped by at least 12-18 months due to these funding delays. From 2011, mine
production of tungsten is likely to grow relatively strongly as a number of tungsten projects are due to come on-stream after being delayed by the
credit crisis. The majority of the new projects are scheduled to come on stream between 2013 and 2015, but it is always possible that these timelines could slip further meaning that the significant increase in tungsten output would come in the 2014 to 2016 period.” Roskill forecasts that mine output of tungsten could grow from 72,000t W in 2011, to around 100,000t W by 2016.
Roskill notes that tungsten prices rose strongly throughout 2010 and most of 2011, as most of the economies outside China recovered from the credit crisis-induced recession and demand for tungsten increased in parallel. At the end of September 2011, prices for Chinese APT had reached US$450-460/mtu, compared to US$330/mtu at the beginning of the year and US$200/mtu at the beginning of 2010. APT prices are now well above the previous peak of US$300/mtu in June 2005.
Roskill expects to see a market fluctuating around an equilibrium level, but forecasts the market to be in deficit in both 2011 and 2012, before new
supply enters the market. Currently, Roskill expects 2013 to be the tipping point where supply overtakes demand in the tungsten market at some point
during the year. Assuming that the majority of planned projects reach production, then a surplus is expected to develop, although any further
delays to new supply entering the market would quickly see a deficit forming and prices would remain higher than in the forecast (probably into 2014).
Given the current levels of APT prices, Roskill expects that the average for the whole of 2011 will rise to a forecast US$430mtu by the end of the
year. Very few of the significant new tungsten projects are expected to deliver any substantial tonnages of tungsten in 2012, so the market will be
relying on existing producers to cope with any growth in demand. As a result, Roskill predicts a further tightening in supplies of tungsten and,
therefore, further price rises, with an average APT price of US$475/mtu.
Prices are expected to ease between 2013 and 2015 as the bulk of planned new tungsten production capacity is expected to enter the market. Demand for tungsten is expected to continue to grow to 2016 and beyond, putting further pressure on the supply side and requiring more new capacity.
Tungsten: Market outlook to 2016, 10th edition is available at GBP4500 /US$7500 / EUR5900 from Roskill Information Services Ltd.