The critical minerals market is facing a significant shake-up as China implements new export controls on tungsten, highlighting growing tensions in the global supply chain for strategic materials. This development has sent ripples through industries dependent on this crucial metal, from defense manufacturing to high-tech sectors.
Impact on Global Supply
China’s dominance in the tungsten market cannot be overstated – the country currently accounts for approximately 80% of global tungsten production. This overwhelming market share gives Beijing considerable leverage in the global supply chain for this strategic metal. The recent export controls announcement has already caused significant market reaction, with North American tungsten producer Almonty Industries seeing its Toronto-listed shares surge 41% over two days as investors respond to potential supply constraints.
Lewis Black, CEO of Almonty Industries, describes his customers as being in a “state of disbelief” following Beijing’s announcement. The concern is well-founded, given that tungsten plays a crucial role in various industrial applications, from armor-piercing munitions to engine parts and semiconductor manufacturing.
Market Structure and Vulnerabilities
The tungsten market, valued at approximately US$5 billion, is relatively small compared to other metal markets like copper, which exceeds US$200 billion in value. However, its strategic importance far outweighs its market size. The concentration of supply is particularly concerning, with China, Russia, and North Korea controlling about 90% of global output.
The United States finds itself in a particularly vulnerable position, having not produced tungsten commercially since 2015. This gap in domestic production has led to heavy reliance on Chinese imports, a situation that is now prompting urgent discussions about supply chain resilience.
Industry Response and Alternative Sources
The industry is actively seeking solutions to reduce dependence on Chinese supplies. Almonty Industries, for instance, is expanding its operations beyond North America. The company is in the final stages of opening a new mine in South Korea, expected to produce 2,500 tons of tungsten annually in its first phase. This development represents a significant step toward diversifying global supply chains.
In the United States, efforts to revive domestic production are gaining momentum. Guardian Metal Resources Plc is developing the Pilot Mountain project in Nevada, with production expected to begin in approximately three to three and a half years. The company’s CEO, Oliver Friesen, emphasizes the critical timing of these developments, suggesting that government support could potentially accelerate the project timeline.
China’s Strategic Position
China’s latest export controls extend beyond tungsten to include other critical minerals essential for high-tech industries. This move appears to be part of a broader strategy, leveraging China’s dominant position in critical minerals markets as one of the few areas where it holds significant supply-side advantage. Unlike major commodities such as crude oil, soybeans, and iron ore, where China is primarily an importer, its control over critical minerals supply gives it unique strategic leverage.
Market Implications
Industry analysts, including Mysteel Global’s Huang Yuting, predict that international tungsten prices will likely rise in response to these restrictions. While China consumes most of its tungsten production domestically, its exports to countries like Germany and Japan play a crucial role in global supply chains.
This isn’t China’s first move to restrict critical mineral exports. The country has previously imposed controls on other strategic metals including gallium, germanium, and antimony, leading to significant price increases in these markets. The tungsten market is expected to follow a similar pattern, given its concentrated nature and limited supply alternatives.
Looking Ahead
The situation highlights the broader challenges facing global supply chains for critical minerals. Companies and governments in the United States and allied nations are being forced to reconsider their supply chain strategies and invest in alternative sources. This includes not only developing new mines but also exploring recycling and processing capabilities to reduce dependence on Chinese supplies.
Almonty’s strategic decision to relocate its domicile from Canada to the United States reflects these changing dynamics. Additionally, the development of new projects like the Pilot Mountain mine in Nevada represents crucial steps toward establishing more resilient supply chains.
The tungsten market’s transformation underscores a larger trend in global trade: the increasing use of critical minerals as strategic leverage in international relations. As industries worldwide grapple with these changes, the development of alternative supply sources and processing capabilities is likely to become an increasingly urgent priority for countries seeking to secure their industrial and defense capabilities.
This situation continues to evolve, with potential implications for global trade patterns, industrial policy, and international relations. The coming months will be crucial in determining how effectively Western nations can develop alternative supply chains and reduce their dependence on Chinese tungsten exports.
Acknowledgment: This article was written with the help of AI, which also assisted in research, drafting, editing, and formatting this current version.
