Tungsten | Best Performing Metal in 20173 min read


Remember tungsten? It had a nice rally in 2011 and 2012, but has been a complete sleeper for the last half-decade. With 80% of the production coming from China, its story is similar to cobalt or rare earths. It was always too niche to get investors too excited; but tungsten prices have exploded out of nowhere in 2017 and its worth knowing why. While stealth as the rally may be, the gains have been impressive – the metal is up about 50% since July.

tungsten price
Tightening of steel production in China designed to contain the environmental fallout from decades of unbridled production has metals such as a zinc and tungsten hitting multi-year highs. Likewise, as is the case with zinc, China has reduced production at numerous tungsten mines to reign in quotas while diminishing pollution.

CNN Money reported on September 13th that,

“David Merriman, a senior analyst at Roskill, said that authorities may have another motive: Reduced production could boost prices and help large producers in the country.”

Whatever the real reason for the production cuts, and despite the increase in tungsten prices, few tungsten stocks have taken off. Tungsten Corp, which trades under the symbol TUNG on the London Stock Exchange is a perfect example.

Tungsten Corp – 5 Year Chart

Tungsten Stocks

 

Ryan Dinse, the Editor at Money Morning, weighed in on tungsten’s performance in a recent article,

“It has beaten all 22 major materials in the Bloomberg Commodities Index. Tungsten has gained for six straight months. The longest rally since 2012.

Tungsten, joined with steel, forms materials that are stable at high temperatures.

At more than 3,400 degrees Celsius, it has the highest melting point of any metal on Earth.”

 

This makes tungsten useful in numerous products, but none more pressing than ballistic missiles.

Trump’s “Rocket Man” Drives Interest in Tungsten Prices

 

Tungsten’s high density makes it ideal for use in ballistic missiles; and tungsten is sometimes referred to as the ‘war’ metal for this reason. Furthermore, tungsten is used in mining drills, other military projectiles, golf clubs and the automotive machinery.

Certainly, tungsten has a level of desirability.

Mark Seddon, senior manager at Argus Consulting (Metals) points to more than just environmental policy, in a Bloomberg article titled China Sends One of the West’s Most Critical Materials Soaring, noting, “They’ve used environmental policy to clamp down on non-quota production.”

Rather, instead of China routinely breaking its quota “by as much as 50 percent” its motives to secure product for its own future development have increased.

According to CNN Money,

“Beijing was forced to alter its rare earth export practices in 2015 after former President Barack Obama filed a formal complaint about export restrictions in 2012 with the World Trade Organization.”

According to a recent iBankCoin.com article,

“The European Union classes tungsten as a “critical” commodity and the British Geological Survey places it at the top of its supply-risk list of materials needed to maintain the U.K.’s economy and lifestyle.”

Alibaba, the Amazon of China, has nearly 2,000 different types of tungsten-related products for sale.

From “Cheap ASTM Cemented Tungsten Carbide Sheet Metal” starting at $10 per kilogram to “white tungsten wire” ranging between $70 and $200 per kilogram. The site is awash with everything from “twisted tungsten wire” to “pure tungsten” (ranging from $50 to $130 per kilo) to tungsten rings and rods.

The market for tungsten is niche, but its growing. Investors and manufacturers are gobbling it up as tungsten prices put together their best rally since 2012. Many metals, including zinc, copper, nickel and gold are having great years; however, the TSX Venture remains below 800.