With Chinese supply expected to decline in the future and geopolitical tensions between the West and China becoming ever more strained, options for new supply may become more of a necessity than a preference.  

Tungsten is known for having the highest melting point of all metals, remarkable hardness, good electrical conductivity, and high corrosion resistance. These properties make tungsten indispensable in applications across various industries such as aerospace, manufacturing, and mining.

Tungsten production is concentrated in just a few key regions. According to the USGS, global reserves stand at 3.8Mt, with 47% located in China. Russia holds the next largest share, followed by Vietnam with 10% and 2.6%, respectively. These three jurisdictions are also the top-three producers of tungsten but it is China that dominates.

Due to the importance of tungsten and the lack of diversity in the supply chain, various Western nations have recognised the metal as ‘critical’ and are looking to new options to diversify supply. And importantly, with Chinese supply expected to decline in the future and geopolitical tensions between the West and China becoming ever more strained, options for new supply may become more of a necessity than a preference. 

China dominates the tungsten market

The tungsten market has been in surplus for nine of the last ten years, the exception being in 2018. The deficit that year was due to China’s government imposing new environmental regulations in 2017. These regulations largely affected the mining and processing sector and led to the suspension of several small-scale tungsten operations in mainland China. This serves as an example of the central role China plays in the tungsten market and how developments in China can affect that market as a whole.  

China ranks first globally for tungsten reserves, production output, and exports. In 2022, approximately 120kt of tungsten-in-concentrate was produced of which 75% (~90kt W) was from mine production and the rest from recycling. China produced approximately 74kt of tungsten in 2022 which accounts for more than 80% of global primary production, a market share which has been relatively consistent over the last decade. To give perspective to China’s primary tungsten production, the second largest producer in 2022 was Vietnam with ~4.8kt tungsten followed by Russia with ~2.5kt tungsten. 

But Chinese reserves and production may be in decline

However, China’s current primary production levels are likely not sustainable in the long term. Reserves are dwindling and grades are declining, and at current rates of production (assuming no new discoveries) China will have exhausted its current reserves by 2050.  A high-profile example is that of CMOC, which reported last year that its Sandaozhuang Mine has 4 years' worth of reserves left. For context, CMOC’s contribution in 2022 was 7.5kt of tungsten and 8.6kt in 2021, approximately 10% of Chinese production. Ultimately, China will either need to identify new reserves or see lower production rates. 

On the exploration front, it is unclear as to whether Chinese reserves are likely to increase. If USGS estimates are accurate, the decrease in reserves from 1.9Mt in 2022 to 1.8Mt in 2023 points to no recent expansion of the reserve base.  Nonetheless, exploration continues in China.  For example, Xiamen Tungsten has recently invested US$117M in the Yau Ma Po tungsten and molybdenum project in Bobai County. How much tonnage this project will add to the Chinese reserve base is unknown, however, it is known that approximately 660ktpy of tungsten-bearing ore will be processed.

On the production front, efforts to protect national reserves come from the Ministry of Natural Resources of China, which issues an annual quota for tungsten mining and distributes it between various tungsten mining enterprises. These quotas have been effective since 2002. China’s 2023 tungsten mining quota was the same as its 2022 and 2021 quota, which was set at 111kt of 65% WO₃-in-concentrate which totals ~72kt W.

In reality, mine production in China usually exceeds the quota. This is because of by-product supply from molybdenum operations, small-scale mining operations, and ASM output. Smaller-scale mines in China are not part of national quotas and instead report their tungsten concentrate production to the provincial Department of Natural Resources. ASM output in China has remained a factor in the tungsten supply chain with recent tungsten prices having been at sufficient levels to incentivise ASM output in some regions. 

Project Blue estimates China’s primary production will see a decline in the near term due to ageing mines and declining ore grades.  Depending on price levels, ASM output may offset or even mask these declines, however.

Meanwhile, the geopolitical environment is becoming more uncertain

Project Blue estimates that tungsten demand will grow by a modest 1.4% over the coming decade. This demand growth will largely be driven by tungsten’s usage in cemented carbides. Other notable end-use markets that will experience growth are steels and alloys, chemicals, and other niche applications. Given China’s decline in production set against growing demand, Project Blue expects a global shortage in supply in the next decade unless new sources of supply are developed. The incentives for new projects are not only based on a looming shortfall, however.  Geopolitical tensions between the West, China and Russia mean that, more than ever, Western consumers are keen to diversify their supply chains.

On a regional basis, North America and Europe’s tungsten consumption combined accounted for one-third of global demand, equivalent to approximately 33kt of tungsten, in 2022. Neither of these regions have enough primary or secondary supply to meet their consumption. In terms of primary supply, the USA has had no active tungsten mine operations since 2015 when Curtis Tungsten produced minor amounts of tungsten concentrate at its Andrew Mine in Los Angeles. In the EU, tungsten supply is limited to a few producers mainly in Spain and Portugal. Other notable primary suppliers include Austria. The insufficient primary supply in both regions has made them reliant on imports. In most cases, these regions have to import semi-finished tungsten products from China. Given China’s looming primary supply decline and the geopolitical context, this could prove problematic in future.

Furthermore, the USA and the EU have put certain policy restrictions in place which will impact market dynamics in future. In 2022, the USA instated the REEShore Act of 2022 which states that the USA prohibits the usage of tungsten sourced from China in any of its military equipment by 2026 and the USA should be able to build out its tungsten stockpiles by 2025. Meanwhile, in 2023, the European Commission extended anti-dumping duties on Chinese tungsten carbide imports for five more years. As such, Western policy – not just Chinese supply issues – is prompting military and downstream tungsten consumers in the West to seek alternative supply sources.

What are the alternatives to Chinese supply?

Outside of China, the rest of the world contributed just under 20% of primary supply in 2022 with very little material produced in the West. In 2022, the second-largest producer was Vietnam, where Masan High-Tech Materials operates the Nui Phao Mine, yielding approximately 4.8kt. Russia followed closely, with its tungsten production of approximately 2.5kt distributed across various enterprises, including Primorsky GOK, Novoorlovsky GOK, Lermontovskiy GOK, Rusolova, and others. North Korea also played a part, although little is known about its mine production, it is estimated that approximately 1.8kt tungsten was produced in 2022 based on trade statistics.  Save for Vietnam, none of these producers are viable sources for Western consumers, with Russia and North Korea being dubbed foreign entities of concern by the USA. 

Outside of the top-three producing countries outside of China, there are two notable groups contributing material to the market. The first group comprises countries with artisanal and small-scale mining activities, including Bolivia, Rwanda, Myanmar, Burundi, the Democratic Republic of Congo (DRC), Mongolia, Nigeria, Thailand, and possibly Uganda. The second group consists of a limited number of European players, with Spain, Austria, and Portugal featuring prominently.

Luckily for the tungsten market, there are new primary sources emerging. Two tungsten projects recommenced in Australia in 2023. In Queensland, EQ Resources (EQR) recommenced mining activities in June at the Andy White Open Cut. EQR was already processing low-grade ores and stockpiles into tungsten concentrate, however, the grades were limiting production output. The resumption of mining activities marked the onset of ramp-up expansions at the project. Currently, EQR’s tungsten concentrate capacity is at 1,200t with a grade of 50% WO₃. However, based on the pit design the production capacity could ramp up to 3,000 to 6,000t of 50% WO₃-in-concentrate.

Meanwhile, on King Island, Tasmania Group 6 Metals recommenced mining and processing activities at its Dolphin mine. Mining began in May and in June the first concentrate which totalled ten metric tonnes was produced. At full ramp-up capacity, Dolphin is expected to produce 2ktpy of 65% WO₃ concentrate. Together, at full ramp-up, these operations could add up to 4,300t of tungsten to the primary supply.

Other companies to have recently renewed tungsten activities outside China include Almonty, which recently restarted processing operations at the Los Santos Mine in Spain and has made advancements with the construction of its Sangdong Mine in South Korea with new equipment deliveries this year.

In total, Project Blue is tracking 30 mine projects (primary tungsten) globally. The development stages of these vary from those that are newly discovered deposits to projects that are under construction. Of these projects, 17 are more advanced, releasing either a pre-feasibility study (PFS), preliminary economic assessment (PEA), a definitive feasibility study (DFS) or are under construction.

Outside of Australia and in the medium term, Project Blue believes six primary tungsten mines could be commissioned over the next ten years which could see an estimated additional 15ktpy of tungsten, the largest of which is the Boguty mine in Kazakhstan, which has a full ramp-up capacity of 15ktpy concentrate grading at 65% WO₃ equivalent to 9750t of tungsten and is getting close to starting commercial production. Other notable projects include Regua, Sangdong, Hermerdon, Cinovec and Pyrkakay. Albeit the new supply will not be able to completely offset Chinese primary supply it certainly will loosen the squeeze of Western supply and demand dynamics in the coming decade.