Here you see a rock containing tungsten ore in a mine in Germany, operated by Saxony Minerals and Exploration.
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BEIJING — China dominates the supply chain for many of the world's most important minerals, but so far the country has resisted sweeping restrictions on at least one mineral: tungsten.
The metal is almost as hard as diamond and has a high energy density. That has made tungsten an important material in weapons, cars, electric car batteries, semiconductors and industrial cutting machines. Chipmakers such as Taiwanese semiconductor manufacturer And Nvidia both use the metal.
“I don't expect any saber-rattling over 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 get too belligerent about diversification, [it becomes a situation that’s] “You bite the hand that feeds you,” he said, adding that “tungsten has always been a diplomatic metal.”
While the Biden administration increased tariffs on tungsten imports In May, China did not include the metal in its shipments last weekend new regulations to improve supervision of domestic production of rare earth metals.
But China may not be too concerned because the Chinese government is ignoring the new tariffs… They completely ignored it because the Chinese don't want tensions to increase.
Lewis Black
CEO of Almonty
“The tariffs were more of a warning shot, as Biden only imposed tariffs on three of the 25 strategic metals that China exports,” Black said.
“But China may not be as concerned because the Chinese government ignored the new tariffs, unlike in the past when they restricted some rare earth exports. They ignored it completely because the Chinese don't want tensions to increase.”
When asked last month whether China would respond to the latest U.S. tariffs on tungsten, Chinese Commerce Ministry spokesman He Yadong did not announce any countermeasures. Instead, he called on the U.S. to scrap the additional duties.
Commodity Price Reporting and Analysis Company Fastmarkets pointed out earlier this year that China has reduced national production quotas for its tungsten mines due to environmental restrictions.
Diversify away from China
Still, Black expects his company to benefit from growing efforts to diversify beyond China. Almonty claims the upcoming mine in South Korea has the potential to produce 50% of the world’s ex-Chinese tungsten supply.
The demand for non-Chinese tungsten is already increasing.
“We see in the US and in Europe that they are asking their suppliers for a China-free supply chain,” said Michael Dornhofer, founder of metals consultancy Independent Supply Business Partner.
The US REEShore Act – or the Restoring Essential Energy and Security Holdings Onshore for Rare Earths Act of 2022 – bans the use of Chinese tungsten in military equipment from 2026, while the European Commission last year extended rates Almonty Industries said in a report that the company will continue to rely on imported Chinese tungsten carbide for another five years.
The House of Representatives Committee on Strategic Competition Between the United States and the Chinese Communist Party last month announced a new working group on US policy on critical minerals.
Rising tungsten prices
Expectations of higher demand and tight supplies of tungsten have pushed prices to multi-year highs, though they have fallen in recent weeks.
Dornhofer said in an interview in late May that he also saw Chinese buyers increasing their purchases of tungsten.
“Since the beginning of this year, they are not only asking for Western concentrate, but they are buying significant volumes, even paying more than Western companies are willing to pay,” he said. “Certainly [going to be] a game-changer.”
In January, an American research agency reported Macro Ops said: “We are approaching a tipping point in tungsten supply. The US will quickly run out of tungsten supplies and move from a net seller to a buyer in the next 12-18 months.”
The U.S. Commerce Department's Bureau of Industry and Security did not immediately respond to a request from CNBC for comment on this story.
Brandon Beylo, head of investment research at Macro Ops, told CNBC in an email that there are only six companies in the U.S. with the capacity to produce tungsten. He added that the U.S. has not produced tungsten domestically since 2015, meaning future U.S. supplies will have to come from overseas.
He said the company does not own any tungsten-related stocks, but he is personally looking for ways to gain access to the physical commodity. There are no futures contracts for tungsten trading.
Other tungsten players head to South Korea
According to Argus, China dominates more than 80% of the tungsten supply chain, although local production costs are rising as mines age, citing Chinese imports of the metal from North Korea, Central Africa and Myanmar.
“This opens up opportunities for projects outside of China,” said Mark Seddon, director of consulting and analytics at Argus, in a Webinar of June 28.
Other non-Chinese companies in the tungsten supply chain are moving to South Korea.
In February, IMC Endmill, a subsidiary of Warren Buffett-owned IMC Group, signed an agreement with the Daegu city government to invest 130 billion Korean won ($93.6 million) in a tungsten powder production plant, a local news report.
IMC Group did not immediately respond to CNBC's request for comment.
China's dominant position in the global supply chain of critical minerals has been built over several decades.
Dornhofer pointed out that efforts to produce tungsten outside of China have been deadlocked for years, with plans for a mine in New Brunswick, Canada, which would have significantly increased global tungsten capacity.
All these projects have been on the table for 20 years, he said. “When people tell you that they will be operational in two years, three years, the question is whether you believe them. On the other hand, [hand]the tungsten is in the ground. It's still there.”
Almonty claims to be the largest producer of tungsten outside China and currently operates primarily in Portugal and Spain. The prospective mine in Sangdong, South Korea, closed in the 1990s.
Black expects that after the mine reopens later this year, his company will account for only 7% to 8% of the world's tungsten supply.
“We are not displacing Chinese,” he said. “That is not our intention.”
“If we were to produce 30 to 40 percent now, I would compete with China. That would not be smart.”
