This photo shows a rock containing tungsten ore in a German mine operated by Sachsen Mineral Exploration.
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“I don’t foresee any military threats over tungsten,” said Lewis Black, CEO of Canada’s Almonte Industries Ltd., which is spending at least $75 million to reopen a tungsten mine in South Korea later this year.
“When we get too aggressive about diversification, [it becomes a situation that’s] “It’s like repaying a favor with an insult,” he said, adding that “tungsten has always been a diplomatic metal.”
The Biden administration raised import tariffs on tungsten in May, but China last weekend did not include it in new restrictions designed to strengthen oversight of domestic rare earth production.
But China may not be too worried, because the Chinese government has ignored the new tariffs… China doesn’t want tensions to escalate, so they’ve completely ignored them.
Lewis Black
Almonti CEO
“These tariffs were more of a warning shot, as Biden only imposed tariffs on three of the 25 strategic metals exported by China,” Black said.
“But China may not be too worried because the Chinese government has ignored the new tariffs, unlike in the past when it restricted some rare earth exports. China doesn’t want to escalate tensions so it has ignored them completely.”
Asked last month whether China would retaliate against the latest U.S. tariffs on tungsten, Commerce Ministry spokesman He Yadong declined to announce any countermeasures and instead called on the U.S. to remove the additional tariffs.
Commodity price reporting and analysis firm FastMarkets noted earlier this year that China had cut national production quotas for tungsten mining due to environmental regulations.
Still, Mr. Black expects his company to benefit from the growing effort to move away from China, and Mr. Almonti argues that upcoming mines in South Korea could produce 50% of the world’s tungsten supply excluding China.
Demand for tungsten outside of China is already growing.
“The U.S. and Europe are asking suppliers to move their supply chains away from China,” said Michael Dornhofer, founder of metals consulting firm Independent Supply Business Partners.
The US REEShore Act (Restoration of Essential Energy and Security Reserves for Rare Earths Act of 2022) bans the use of Chinese tungsten in military equipment from 2026 onwards, while the European Commission last year extended tariffs on tungsten carbide imports from China for another five years, Almonti Industries noted in the report.
The House Select Committee on U.S.-Communist China Strategic Competition last month announced the creation of a new working group on U.S. critical minerals policy.
Rising demand for tungsten and expectations of a supply shortage had driven prices to multi-year highs but they have been trending lower in recent weeks.
Chinese buyers are also increasing their purchases of tungsten, Dornhofer said in an interview in late May.
“Since the beginning of this year, they have not only sought Western enrichments, but have been buying significant quantities at prices higher than Western companies are willing to pay,” he said. “Without a doubt, [going to be] It’s a game changer.”
“Tungsten supply is approaching a tipping point as the US will soon run out of tungsten stockpiles and transition from a net seller to a net buyer over the next 12 to 18 months,” US research firm MacroOps said in January.
The Commerce Department’s Bureau of Industry and Security did not immediately respond to CNBC’s request for comment on the matter.
Brandon Baylo, head of investment research at MacroOps, told CNBC in an email that there are only six companies capable of producing tungsten in the U.S. He added that the U.S. hasn’t produced tungsten domestically since 2015, and future U.S. supplies will have to come from overseas.
He said his company does not hold any tungsten-related stocks but is personally exploring ways to gain access to the physical commodity. There is no futures trading for tungsten.
China dominates more than 80% of the tungsten supply chain, but as local production costs rise due to aging mines, China is importing tungsten from North Korea, Central Africa and Myanmar, according to Argus.
“This creates opportunities for projects outside of China,” Mark Seddon, principal of consulting and analysis at Argus, said during a June 28 webinar.
Other non-Chinese companies in the tungsten supply chain are also relocating to South Korea.
IMC End Mill, an affiliate of Warren Buffett’s IMC Group, signed a deal with the Daegu city government in February to invest 130 billion Korean won ($93.6 million) in a tungsten powder production facility, according to local reports.
IMC Group did not immediately respond to CNBC’s request for comment.
China’s dominance in the global critical minerals supply chain has been built up over decades.
Dornhofer noted that efforts to produce tungsten outside China have been stalled for years, including a proposed mine in New Brunswick, Canada, that would have significantly increased global tungsten capacity.
All of these projects have been under consideration for 20 years, he says. “When they say they’ll be up and running in two or three years, it’s a question of whether you believe it or not. [hand]The tungsten is buried in the ground. It’s still there.”
Almonty claims to be the largest tungsten producer outside China and currently operates mainly in Portugal and Spain. A proposed mine at Sandong, South Korea, closed in the 1990s.
Black expects his company to account for just 7% to 8% of the world’s tungsten supply after mines reopen later this year.
“We’re not going to exclude the Chinese,” he said. “We’re not going to.”
“If we were to produce 30 to 40 percent in the future, we would be competing with China, which would not be wise.”
