China key to Tungsten market Cutbacks would help

Supply restrictions by major producers such as China are the only way to improve tungsten prices, yet prices could experience a period of volatility not seen since the early 1970s if such restrictions are not properly managed, says Roskill Information Services of London.

The gradual decline in tungsten prices in the early 1980s could be reversed if Chinese and other sources restrict supply, says Roskill’s new study. However, any such restrictions “must be applied with finesse and with constant attention to all the short-term changes in the market” in order to avoid large price swings.

Canada ranked third among world producers of tungsten in 1984 producing about 20% of world supplies with production of about 3,715 tonnes contained tungsten in ores and concentrates. Energy, Mines and Resources says Canada’s position was maintained in 1985 despite a 20% decline in production.

The production decline was largely due to the closing in mid- 1985 of the Mount Pleasant tungsten mine in New Brunswick. Canada Tungsten Mining’s tungsten mine in the Northwest Territories, the only other producing tungsten mine in Canada, was running at about 65% capacity during 1985.

The Mount Pleasant mine is a joint venture of Sullivan Mines (through its 89% ownership of Brunswick Tin Mines) and Billiton Canada.

Roskill says tungsten producers of the Western World are having a particularly hard time so far in the 1980s.

Consumption, which fell sharply in the early 1980s, has since recovered but prices have not. Even in current terms, the price of tungsten concentrates in mid-1986 was lower than at any time since 1973. In constant prices, concentrates now fetch only a small proportion of what they fetched in real terms in the 1960s.

“The chief cause is clear,” says Roskill. “Some suppliers appear to have pursued increased sales volume and market share regardless of profitability.”

The U.S. Bureau of Mines, for example, says that U.S. industrial activity in tungsten decreased 35% in June of this year compared with the monthly average for the first five months of 1986. Industrial activity for the first half of 1986 was 17% below that for the first half of 1985 prior to the decline that began in mid-1985.

Recovery of demand for tungsten has not matched the pace of economic recovery since the early 1980s’ recession for a number of reasons.

*Advances in cutting technology. Reductions in size of hard metal inserts and the use of coated tips to prolong life have both reduced consumption of tungsten per unit of output. Alternative materials, notably ceramics, are replacing carbides in some applications.

*Advances in foundry technology. Near net shape castings require less machining.

*Recycling. Encouraged by the relatively high price of tungsten in the 1970s,recycling now supplies about 15% of total demand.

Demand has thus risen — and will continue to rise — more slowly in relation to general economic growth than in the past.

It is producers in the industrialized countries, however, who now tend to be the swing producers making the attempt to match production to falling demand and to halt the fall in prices.

Roskill’s new study, The Economics of Tungsten, 1986, provides a mass of current information on which to base forecasts and policies.