Tungsten, a metal essential for weapon manufacturing and semiconductor production, is undergoing an unprecedented price surge. According to Fastmarkets' APT European benchmark price data, tungsten is currently priced at $2,250 per metric ton unit, representing a staggering 557% increase compared to one year ago. This performance significantly outpaces other mainstream commodities like gold, copper, and crude oil over the same period. Since the start of this year, the price of tungsten has more than doubled.
A key driver behind this rally stems from two primary factors: a sharp increase in military demand and persistent tightening on the supply side. Conflicts in the Middle East are rapidly depleting inventories, prompting buyers to urgently seek alternative sources. Concurrently, Western governments are accelerating efforts to localize supply chains for critical minerals, further reinforcing market expectations regarding tungsten's scarcity.
Military demand is a major catalyst for the price surge. Tungsten is an ultra-dense metal prized for its armor-piercing capabilities, making it widely used in military equipment such as armor-piercing shells, missile components, and counterweights for helicopters and fighter jets. One analyst noted that military-related tungsten consumption is projected to grow by 12% this year, spanning various sectors including helicopters, fighter aircraft, and ammunition.
The ongoing conflict has served as a stark reminder of the intensive metal consumption characteristic of 21st-century warfare. The analyst highlighted the crucial role tungsten plays in the thousands of drones and interceptor missiles being utilized. The persistent conflict in the Middle East is identified as a significant factor behind the recent acceleration in price increases. As user inventories are depleted, the imbalance between market supply and demand becomes increasingly pronounced, continuously building upward pressure on prices.
The supply gap is not easily or quickly filled. The tungsten market is highly concentrated and niche. Global market size for tungsten this year is estimated to be around $16 billion, only about 5% of the copper market. China is the world's largest exporter of tungsten ore, accounting for approximately 79% of the global production last year.
One mining company CEO reported that his firm commenced production at a tungsten mine in South Korea last December and is seeking to develop what would be the first new tungsten mine in the United States in a decade. He revealed that U.S. authorities contacted the company last month regarding immediate supply, with nearly half of the output from its Korean operation slated for ammunition production in Pennsylvania.
However, bridging the supply gap will not happen overnight. Expansion of mining capacity in countries like Spain, Brazil, Australia, and the United States is estimated to take at least about two years to come online—provided investors are convinced that high prices will persist. One industry expert views the current supply tightness as a temporary phenomenon, suggesting the market may face a challenging period of up to 24 months.
This dramatic price surge also reflects a deeper structural shift in the market: a reshaping of the price discovery mechanism. Historically, market prices have long deviated from true supply and demand fundamentals. The market has never truly been in a state where prices are determined purely by market forces, creating uncertainty about where prices will ultimately stabilize.
Tungsten is not traded on major exchanges, resulting in low market transparency and poor liquidity, which further amplifies price volatility risks. Given the market's scarcity and illiquidity, there is a warning that prices have the potential to surge even higher.
Some large consumers are turning to recycling to hedge against supply risks. A major hard metal tool manufacturer stated it mitigates supply pressures by collecting and recycling scrap material. Another large engineering group also has businesses involved in both tungsten mining and recycling. Nevertheless, scrap recycling can only partially offset the deficit in primary supply. A fundamental resolution to the structural tightness ultimately depends on substantial expansion of global mining capacity.