The U.S. needs more of this critical metal — and China owns 80% of its supply chain

BEIJING
—
China
dominates
the
supply
chain
for
many
of
the
world’s
critical
minerals,
but
so
far
it’s
held
off
on
sweeping
restrictions
on
at
least
one:
tungsten.

The
metal
is

nearly
as
hard
as
diamond
and
has
a
high
energy
density.
That’s
made
tungsten
an
important
material
in
weapons,
autos,
electric
car
batteries,
semiconductors
and
industrial
cutting
machines.
Chipmakers
such
as


Taiwan
Semiconductor
Manufacturing
Company
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]
biting
the
hand
that
feeds
you,”
he
said,
adding
that
“tungsten
has
always
been
a
diplomatic
metal.”

While
the
Biden
administration

raised
tariffs
on
imports
of
tungsten
in
May,
China
this
past
weekend
did
not
include
the
metal
in

new
regulations
for
boosting
its
oversight
of
domestic
rare
earths
production.

“The
tariffs
were
more
of
a
warning
shot,
as
Biden
only
put
tariffs
on
three
of
the
25
strategic
metals
China
exports,”
Black
said.

“But
China
might
not
be
too
concerned,
because
the
Chinese
government
ignored
the
new
tariffs,
unlike
in
the
past
when
they
restricted
some
exports
of
rare
earths.
They
completely
ignored
it
because
the
Chinese
don’t
want
tensions
to
rise.”

Asked
last
month
if
China
would
retaliate
to
the
latest
U.S.
tariffs
on
tungsten,
China’s
Ministry
of
Commerce
spokesperson
He
Yadong
didn’t
announce
countermeasures.
Instead,
he
called
on
the
U.S.
to
remove
the
additional
duties.

Commodity
price
reporting
and
analytics
company

Fastmarkets
pointed
out
earlier
this
year
that
China
has
reduced
national
production
quotas
for
its
tungsten
mines
due
to

environmental
restrictions.

Still,
Black
expects
his
company
to
benefit
from
growing
efforts
to
diversify
away
from
China.
Almonty
claims
the
forthcoming
mine
in
South
Korea
has
the
potential
to
produce
50%
of
the
world’s
ex-China
tungsten
supply.

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

“We
see
in
the
U.S.,
in
Europe,
they
ask
their
suppliers
for
a
China-free
supply
chain,”
said
Michael
Dornhofer,
founder
of
metals
consulting
firm
Independent
Supply
Business
Partner.

The
U.S.
REEShore
Act
—
or
Restoring
Essential
Energy
and
Security
Holdings
Onshore
for
Rare
Earths
Act
of
2022
—

prohibits
the
use
of
Chinese
tungsten
in
military
equipment
starting
in
2026,
while
the
European
Commission
last
year

extended
tariffs
on
imported
Chinese
tungsten
carbide
for
another
five
years,
Almonty
Industries
pointed
out
in
a
report.

The
House
Select
Committee
on
the
Strategic
Competition
between
the
United
States
and
the
Chinese
Communist
Party
last
month

announced
a
new
working
group
on
the
U.S.
critical
minerals
policy.

Expectations
for
higher
demand
and
limited
supplies
of
tungsten
have
pushed
prices
to
multi-year
highs,
although
they
have
tapered
off
in
the
last
several
weeks.

Dornhofer
said
in
an
interview
in
late
May
that
he
was
also
seeing
Chinese
buyers
increasing
their
tungsten
purchases.

“Since
the
beginning
of
this
year,
they
are
not
only
asking
for
Western
concentrate,
but
they
are
buying
significant
volumes,
paying
even
more
than
Western
companies
are
willing
to
pay,”
he
said.
“Definitely
[going
to
be]
a
game
changer.”

Back
in
January,
U.S.-based
research
firm

Macro
Ops
said:
“We’re
approaching
an
inflection
point
in
tungsten
supply.
The
US
will
quickly
run
out
of
stockpiled
tungsten
and
flip
from
net
seller
to
buyer
over
the
next
12-18
months.”

The
U.S.
Bureau
of
Industry
and
Security
at
the
Department
of
Commerce
did
not
immediately
respond
to
a
CNBC
request
for
comment
on
this
story.

Brandon
Beylo,
head
of
investment
research
at
Macro
Ops,
told
CNBC
in
an
email
there
are
only
six
companies
in
the
U.S.
with
capacity
to
produce
tungsten.
He
added
that
the
U.S.
hasn’t
produced
tungsten
domestically
since
2015,
meaning
future
U.S.
supply
must
come
from
overseas.

He
said
the
firm
doesn’t
own
tungsten-related
stocks,
but
that
he’s
personally
looking
for
ways
to
access
the
physical
commodity.
There
are
no
futures
for
trading
tungsten.

China
dominates
over
80%
of
the
tungsten
supply
chain,
although
local
production
costs
are
rising
as
the
mines
age,
according
to
Argus,
noting
Chinese
imports
of
the
metal
from
North
Korea,
central
Africa
and
Myanmar.

“This
presents
an
opportunity
for
projects
outside
China,”
Mark
Seddon,
principal,
consulting
and
analytics
at
Argus,
said
in
a

June
28
webinar.

Other
non-Chinese
companies
in
the
tungsten
supply
chain
are
going
to
South
Korea.

In
February,
IMC
Endmill,
an
affiliate
of
Warren
Buffett-owned
IMC
Group,
signed
an
agreement
with
the
Daegu
city
government
for
a
130
billion
Korean
won
($93.6
million)
investment
in
a
tungsten
powder
manufacturing
facility,
according
to
a

local
news
report.

IMC
Group
did
not
immediately
respond
to
CNBC’s
request
for
comment.

China’s
dominance
in
global
critical
minerals
supply
chains
has
been
built
up
over
several
decades.

Dornhofer
pointed
out
that
efforts
to
produce
tungsten
outside
of
China
have
languished
for
years,
including
plans
for
a
mine
in
New
Brunswick,
Canada,
that
would
have
significantly
increased
global
tungsten
capacity.

All
these
projects
have
been
on
the
table
since
20
years
ago,
he
said.
“When
people
tell
you
in
two
years,
three
years
they
will
be
in
operation,
it’s
a
question
of
whether
you
believe
them.
On
the
other
[hand],
the
tungsten
is
in
the
ground.
It’s
still
there.”

Almonty
claims
to
be
the
biggest
producer
of
tungsten
outside
China
and
right
now,
primarily
operates
in
Portugal
and
Spain.
The
forthcoming
mine
in
Sangdong,
South
Korea,
closed
in
the
1990s.

After
the
mine
reopens
later
this
year,
Black
expects
his
company
will
account
for
only
7%
or
8%
of
global
tungsten
supply.

“We’re
not
crowding
out
any
Chinese,”
he
said.
“We
don’t
intend
to.”

“Now
if
we’re
going
to
produce
30%
to
40%,
I’m
taking
a
battle
with
China,
which
wouldn’t
be
a
smart
thing
to
do.”