Tungsten Industry Improved in S tability

Since the beginning of this year, in the face of grim market situation, all tungsten enterprises actively adopted measures to improve quality and performance, reduce cost and increase efficiency, tap potentials and increase efficiency, production remained steady, market stabilized, enterprise performance improved to certain degree. Although tungsten market price has presented stabilizing and rallying trend, it still hovers at low level, and still has not recovered to the level in the same period in 2015, tungsten concentrate price is lower than industry average cost line, enterprise performance has not brought about a fundamental turn for the better, enterprise production operation still faces a number of difficulties.

According to statistics of China Tungsten Industry Association, in the first half of the year, 113 main tungsten enterprises recorded 25.245 billion yuan of operating income, down by 1.11% on Y-o-Y basis, 1.249 billion yuan of total profit tax, down by 30.28% on Y-o-Y basis, recorded 247 million yuan of total profit, down by 18.21% on Y-o-Y basis, loss coverage of the industry shrank to certain degree.

According to statistics, in the first half of the year, nationwide output of tungsten concentrate was 58834 tonnes, down by 3.34% on Y-o-Y basis, wherein, tungsten concentrate output of 41 major tungsten mine enterprises is 30590 tonnes, down by 14.68% on Y-o-Y basis; from January to August nationwide tungsten concentrate output is 81859 tonnes, down by 4.63% on Y-o-Y basis.

Domestic tungsten market price remained at low level, tungsten mine enterprises reduced production or suspended production, downstream smelting processing enterprises suspended production or operated with inadequate capacity, market trading volume remained low, output of tungsten smelting product widely declined to certain degree, processing products widely grew to certain degree. According to statistics of the China Tungsten Industry Association,in the first half of the year, output of APT, tungsten oxide, tungsten powder, tungsten carbide, ammonium tungsten partial, crude tungsten wire, thin tungsten wire, tungsten electrode and carbide alloy of major tungsten smelting processing enterprises respectively dropped by 6.04%, 3.21%, 3.15%, 3.33%, 7.51%, 19.8%, 24.58%, 7.80% and 0.50% on Y-o-Y basis; outputs of tungsten strip, tungsten iron and high gravity alloy respectively increased by 11.41%, 39.86% and 47.36% on Y-o-Y basis.

In the first quarter, global tungsten market demand remained sluggish, after entering the second quarter the global tungsten market demand presented rallying trend, inquiry and order increased slightly, export tungsten quality and quantity presented growing trend.

According to statistics made by the China Tungsten Industry Association based on customs data, from January to August export tungsten product is 14075.74 tonnes (excluding carbide alloy, converted to tungsten metal, the same below), up by 12.36% on Y-o-Y basis, the growth margin expanded by 4.84 percentage points than January~June period, wherein export original quota tungsten product is 10121.32 tonnes, up by 2349.80 tonnes, or30.24% on Y-o-Y basis, growth margin expanded by 8.98 percentage points than January~June period; export amount USD423 million, down by 14.92% on Y-o-Y basis, the decline margin narrowed by 5.58 percentage points than January~June period.

Export carbide alloy grew slightly. According to statistics of the China Tungsten Industry Association Carbide Alloy Branch, in the first half of the year, 32 enterprises recorded 3129 tonnes of export carbide alloy, up by 2.66% on Y-o-Y basis.

According to statistics made by the China Tungsten Industry Association based on customs data, from January to August import tungsten product is 2121.82 tonnes (excluding carbide alloy, converted to tungsten metal, the same below), down by 10.31% on Y-o-Y basis, wherein import tungsten concentrate is 1484.76 tonnes, down by 11.98% on Y-o-Y basis; import amount is USD 51.88 million, down by 29.15% on Y-o-Y basis. Since Russia cancelled tariff for export tungsten concentrate, in August import tungsten concentrate grew significantly, but the total volume of import tungsten product still declined on Y-o-Y basis, and the decline margin widened.

Since November 2015, thanks to joint efforts of the entire industry, especially the guidance of the presidium unit, as well as twice state reserve collections, it greatly alleviated supply and demand contradiction of the tungsten market, and boosted market confidence, domestic tungsten market price presented positive change of rational recovery, nevertheless, due to factors such as market irrational selling for arbitrage, and environmental protection measures, prices underwent fluctuation, despite overall trend toward stability.

Firstly, prices of domestic tungsten market generally stabilized and rallied. From January to September average price of domestic tungsten concentrate is 67700 yuan/tonne, down by 13.78% on Y-o-Y basis, APT average price is 105,500 yuan /tonne, down by 12.78% on Y-o-Y basis, the Y-o-Y decline margin narrowed.

Secondly, domestic tungsten market price propelled stabilization and rebound of export tungsten product price. From January to August the comprehensive average price of export tungsten product is USD 30052.27/ tonne tungsten metal, down by 24.28% on Y-o-Y basis, the declining margin narrowed by 1.79 percentage points than January~June period. Monthly average price of export APT rose genearlly, August monthly average price is USD 23638.81 / tonne metal, July monthly average price dropped by 8.00% on monthly basis, but higher than January monthly average price increase USD1454.05/tonne metal, up by 6.55%. The global tungsten market price has generally stabilized.

China’s tungsten industry will continue to face grim challenges due to a number of factors: Complicated and grim international environment, global capacity surplus, slowdown in demand growth; China’s weakening cost advantage, intensified market competition, increasingly obvious deep-rooted contradictions long accumulated in the tungsten industry, which means the task of achieving stabilizing growth is still arduous.

Judging from international market, global economic recovery still lacks momentum, global finance is in turmoil, commodity prices continued to fluctuate, overseas tungsten enterprises still cherished wait-and-see mentality, stock replenishment is sluggish, some overseas tungsten enterprises are looking for new supply channels of tungsten raw materials, coupled with the launching of new tungsten ore exploitation and smelting projects, and increase in waste tungsten recycling usage, all combine to exert impact on China’s export of tungsten raw materials, which results in no obvious improvement in sluggish demand in the global tungsten market. Nevertheless, India and other Asian emerging economies still maintain robust growth in national economy,and will continue to fuel recovery of international tungsten market demand, in the fist half of the year, global new car sales in top 10 markets grew by 4.85% on Y-o-Y basis, the number of active petroleum and natural gas rigs climbed each month, mining activities gradually recovered, demand of international tungsten market generally remained stable. Judging from domestic market, China’s economy maintains steady operation, and makes progress and displays highlights while keeping stability, which matches expectation. In August, profits of nationwide industrial enterprises recorded growth in recovery. From January to August, total profit of nationwide industrial enterprises above designated size grew by 8.4% on Y-o-Y basis, the growth rose by 1.5 percentage points than the period from January to July. China’s tungsten industry is still positioned at mid to low end in the global tungsten industry value chain, the potential of high-end development is great, industry association degree is high, with the accelerated execution of upgrading program in computer numerical control machine tools, robot, automobile manufacture, airplane manufacture and related industries, they will all continue to fuel and maintain steady growth of domestic tungsten consumption, China’s tungsten industry still remains in an important period of strategic opportunity for development.

China’s tungsten industry policy, output and price are key factors influencing the global tungsten market. As the government strengthens supervision on tungsten industry, especially supervision policy on tungsten smelting environmental protection, it will promote stabilization of tungsten ore exploitation aggregate volume, and rational development & utilization of tungsten ore resources and protection of ecological environment, it will play positive role in improving supply-demand contradiction in tungsten market, stabilizing and lifting prices of tungsten raw materials.

Prices long kept below production cost are unsustainable. Currently, domestic and overseas downstream enterprises have extremely low stock of tungsten raw materials, tungsten industry actively adopts cost reduction, efficiency improvement, and output compression measures, the output of tungsten concentrate recorded widespread decline to certain degree, most overseas tungsten mines are in stages of mineral prospecting, feasibility or construction preparation, output of tungsten concentrate remained generally stable. With the replenishment of tungsten raw materials stock, market demand will further recover, which is expected to drive prices in the entire industrial chain to rationally return to normal price level.

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