EB SECURITIES released a research report stating that China's tungsten concentrate supply is expected to continue tightening, supported by robust underlying demand and growth drivers such as military and photovoltaic applications. The supply-demand dynamic for tungsten is anticipated to remain in a tight balance, further supported by rising mining costs. Although some price corrections for tungsten concentrate are expected, the firm maintains that tungsten prices will operate at high levels during 2026-2027. Listed companies in the tungsten sector are poised to benefit. The main views of EB SECURITIES are as follows.
Tungsten is one of only two metals in China subject to production quota controls, yet it suffers from low industry concentration. As an advantaged resource for China, the country accounted for 80.77% of global tungsten concentrate production and 52.27% of global reserves in 2023, ranking first worldwide. Tungsten and rare earths are the only two metallic minerals currently under total mining quota control in China. Compared to rare earths, a key characteristic of tungsten is its lower concentration: in 2024, the CR4 for China's tungsten mining capacity was only 43.94%, and CR6 was merely 55.87%, indicating an urgent need for industry consolidation compared to the two major rare earth groups. Low concentration implies a proliferation of small-scale tungsten mines, which increases the likelihood of illegal or excessive mining.
The logic for the continued tightening of China's tungsten concentrate supply is threefold. Firstly, China maintains strict controls and a quota system for tungsten mining. The first batch of tungsten mining quotas for 2025 decreased by 6.45% year-on-year, indicating a long-term trend of slowing quota growth. Secondly, China's production from excessive mining has been consistently declining. The proportion of tungsten output from over-quota mining dropped from 35.78% of total production in 2015 to 12.63% in 2024. Thirdly, after over a century of mining, the grade of China's tungsten resources is declining annually. The average grade of processed tungsten ore nationwide fell from 0.42% in 2004 to 0.28% in 2016.
On the demand side, cemented carbide provides a stable foundation, with additional growth points in military and photovoltaic sectors. The breakdown of domestic tungsten demand in 2024 is as follows: cemented carbide (58.51%), tungsten materials (22.61%), tungsten specialty steel (15.05%), and tungsten chemicals (3.83%). Demand for cemented carbide has maintained steady growth in recent years. Against the backdrop of ongoing small-scale armed conflicts globally and increasing military expenditures by major powers, demand for military-grade tungsten is set for sustained growth. Photovoltaic tungsten wire, categorized under tungsten materials, currently has a small volume but exhibits rapid growth rates.
Rising tungsten prices may lead to limited substitution in the short term. Alternatives for cemented carbide tools include high-speed steel, super-hard materials, and ceramics, while steel wire is an alternative for photovoltaic tungsten wire. In the cemented carbide sector, the ongoing digitalization of machine tools and more efficient corporate management of tool usage will cement its dominant position in the cutting tool industry. For photovoltaic tungsten wire, as silicon material prices gradually recover and return to reasonable levels, the cost-performance advantage of tungsten wire diamond saws will become more apparent, leading to a recovery in any temporarily affected demand. Overall, the current round of tungsten price increases is expected to have only a minor, short-term impact on tungsten demand.
The tungsten supply-demand balance sheet indicates a persistently tight balance in the future. The firm has projected the supply-demand balance for tungsten metal in both China and globally for the coming years. It is expected that both markets will remain in a tight balance. The projected supply-demand gap for China as a percentage of total demand is -3.78%/-4.61%/-1.46% for 2025/2026/2027, while the global gap is projected at -3.11%/-3.78%/-1.48% for the same years. Coupled with rising mining costs due to factors like environmental pressures, the firm believes tungsten prices will remain high.
Risk warnings include fluctuations in tungsten product prices; risks of additional tungsten supply; risks of substitution for downstream cemented carbide products and slower-than-expected adoption of photovoltaic tungsten wire; and discrepancies between theoretical calculations and actual outcomes.