IMPACTS OF RUSSIA-UKRAINE CONFLICT ON TUNGSTEN MARKET & PRICE

PART IV OF X

Political & Economic Environment Production Cost of China's Tungsten Products in 2022 (1/2)

In the first three parts of this paper, we gradually introduced the various military uses of tungsten products as important strategic materials under the background of the conflict between Russia and Ukraine, and clarified the importance and strategic significance of tungsten products under the haze of regional tension and war; We also introduced the tungsten resources, mining and processing of tungsten products in Russia, which is a major resource country in the world; In the third part, we summarize Russia's resource advantages in oil and gas, nickel, aluminum and other metals, wheat, corn and other food crops to illustrate the comprehensive and irreversible cost pressure on China's tungsten products in several aspects, such as energy and power, chemical raw materials, labor costs and so on, under the background of the conflict between Russia and Ukraine and the price rise caused by serious global inflation caused by the over development of the US dollar.

In the fourth part of this paper, we plan to analyze the macro political and economic environment faced by China's tungsten products market; At the micro level, we analyze the price change trend of various cost components of China's tungsten products production and processing enterprises, so that we can make a basic trend judgment on the price change of tungsten products in 2022. At the end of the third part, we predict that the probability of price rise of tungsten products made in China is greater than 90%, and:

THE PRCIE OF TUNGSTEN IN CHINA’S MART HAS INCREASED BY 20% IN 2021
THE TOTAL AVERAGE PRICE WILL STILL RISE BY NO LESS THAN 20% IN 2022

So far, our analysis logic is clear. The obvious reasons include but are not limited to: (1) the Russian Ukrainian conflict has brought about the shortage of tungsten products produced in Russia and the increase of military demand; (2) Sanctions against Russia and poor logistics have led to a tight supply of energy and bulk commodities and a corresponding rise in prices; (3) Quantitative easing will trigger global inflation, while the US dollar interest rate hike will drive the prices of metals and other commodities to soar; (4) As the world's major producers of tungsten products and 80% of the suppliers without resources, China's political and economic stability, proper and efficient epidemic control, increased demand in China's domestic market, moderately loose currency and obvious appreciation trend of RMB. We are divided into four factors at the same time. It is very unlikely that the average price of tungsten products will fall in 2022. There is only an overall upward trend. Our only question is how much it will rise!

The judgment that China's tungsten products and the global tungsten products market will increase by an average of 20% in the next year is mainly based on the price change trend of various raw materials in the Chinese market in 2021 and the rising range of tungsten products prices, and we believe that the lag of cost transmission after the price rise of some raw materials will be basically reflected this year, and the resonance effect of subsequent price rise will be superimposed. So, this is an uncomputed empirical estimate. Just reflect a trend and a professional " Somatosensory" of this trend!

According to the above logic, we believe that the price of tungsten products will maintain a slight fluctuation and an overall average upward trend from 2022 to the first quarter of 2023. China Tungsten online will analyze from two perspectives: (1) macro aspects, namely, economic development needs, monetary and financial policies, etc; (2) Micro aspect, that is, the change of production and manufacturing cost and price composition of tungsten products.

1. Macro Factors Affecting the Market Demand and Price of Tungsten Products

1.1 Russian Demand for Tungsten Products

Since the conflict between Russia and Ukraine for more than a month, the two sides seem to have won or lost each other. Behind the battlefield is the peace talks vigorously promoted by the two sides and all parties around the world. On March 29, Russia and Ukraine completed the fourth round of peace negotiations in Istanbul, Turkey. The negotiations sent a positive and constructive signal, which plunged the international oil price and gave all people hope for peace.

As stated in the title of this article, the decisive factor we can identify is that the Russian Ukrainian conflict that has occurred and is continuing has changed the original supply and demand pattern of tungsten products. According to the data we sorted out earlier, it is estimated that Russia's annual production capacity of nearly 3000 tons of tungsten products will be used in Russia. However, because several major Russian tungsten products production and processing enterprises can only produce some primary processed tungsten products, Some higher-end tungsten products, such as nano tungsten powder, tungsten carbide powder, high-end cemented carbide, high specific gravity tungsten alloy, tungsten copper alloy and other products, do not have a large capacity in Russia. Therefore, Russia may also need to buy some high-end tungsten raw materials and products from the international market. With the tight war and increasing demand, it is expected that the demand for tungsten products in Russia will continue to increase at home and abroad. Of course, such demand is caused by non market factors, because the consumption of tungsten products by war and the expected reserves of war will lead to an irrational increase in the demand for tungsten products. This is also the most difficult aspect for us to predict the tungsten products market in 2022.

1.2 Dmand of China's Economic Growth for Tungsten Products

1.2.1 "Rigid Demand" of GDP Growth on Tungsten Products in 2022

According to the just concluded session of China's National People's Congress, Premier Li Keqiang put forward in his government work report on March 5 that the main expected development goals for this year are: GDP growth of about 5.5% and consumer prices rise of about 3%. It also emphasizes that the setting of the expected target of economic growth mainly considers the needs of stabilizing employment, ensuring people's livelihood and preventing risks, and is connected with the average economic growth in the past two years and the objectives of the 14th Five-Year Plan.

China's GDP is expected to grow by 5.5% in 2022, which is actually a medium and high-speed growth on a high base. It seems that the growth rate is lower than the overall target of 6% in 2021, but it reflects the initiative. On the basis of the huge overall volume of China's economy, it needs hard work to achieve it.

We know that the production of modern industry is inseparable from the use of tools and instruments such as cutting, drilling, maching tools and molds dominated by tungsten. Based on the analysis of the consumption structure of tungsten products, tungsten is mainly used in cemented carbide cutting tools, tungsten containing steel production, metal tungsten material processing, tungsten heavy alloy products and tungsten chemical raw materials. The application consumption structure of tungsten products can not only reflect the overall development level and technical capacity of all aspects of China's contemporary industry, but also reflect the mining, smelting and fine processing capacity and development trend of China's tungsten industry.

According to the production and consumption data of tungsten products industry in the past few decades, on average, about 50% of tungsten raw materials are used to process and manufacture cemented carbide, and about 72% in developed countries represented by Sandvik and Kennametal in Europe and America. However, since China is a major producer and supplier of tungsten products in the world, we provide most tungsten products except cemented carbide mainly produced in the west, including tungsten chemicals, from primary sodium tungstate and ammonium tungstate, To high-quality micron and nano tungsten chemicals and alloy products of tungsten and metal elements such as molybdenum, copper, iron and nickel, therefore, the production and supply of tungsten products in China covers the whole industrial chain of basic application fields and high-end processing of tungsten products, in which cemented carbide products account for slightly less than 50%. However, with intelligent manufacturing and industrial upgrading, the product structure of tungsten products in China will change, the proportion of tungsten products such as cemented carbide with high technical content will continue to increase, and more and more low-end tungsten products will be imported from Vietnam and other countries.

Comprehensively analyze the relationship between the growth of China's GDP and the consumption of tungsten concentrate in recent years. For the first time in the industry, China Tungsten online uses the consumption ratio between GDP and tungsten concentrate to investigate the relationship between the quality of China's GDP growth and the use efficiency and recovery rate of tungsten concentrate, so as to reflect the technical capacity of China's tungsten products industry and the quality of China's GDP growth.

According to the data analysis in the above table, we find that the ratio of trillion GDP to tungsten concentrate consumption in China has continued to decline since 2010, and the trillion GDP tungsten concentrate consumption in 2021 (0.1165) is lower than 50% of that in 2010 (0.2478). We believe that this shows that (1) the comprehensive utilization rate of China's tungsten products industry has improved. The average ore consumption of front-end ammonium tungstate and oxide products is reduced, and the recovery rate and utilization rate of waste scrap and waste products are improved; At the same time, the proportion of back-end products, such as alloy products, and high value-added products, such as cemented carbide and printing spherical tungsten powder, has increased; (2) The quality of China's GDP has improved year by year. From the consumption of tungsten products, the production efficiency of factories and the added value of products have been improved, the proportion of tertiary industry has increased, and the proportion of high-tech, information industry and service industry has increased year by year. The statistical data of China Tungsten Industry Association also shows this point: the main business income of tungsten industry in 2021 hit a record high, reaching nearly 100 billion yuan, a year-on-year increase of 34.23%; The total profit and tax was 9 billion yuan, a year-on-year increase of 22.45%, and the total profit was about 5.3 billion yuan, a year-on-year increase of 51.43%. APT production capacity was 192000 tons, a year-on-year decrease of 2.78%; Cemented carbide production capacity of 60000 tons, an increase of 9.09%.

The basic situation of China's tungsten products industry in 2021 can be described as the rise of both volume and price. In 2021, the production and operation activities of enterprises continued to recover at a high speed after the epidemic, bringing a bumper harvest year to the tungsten products industry. According to the data released by the Ministry of natural resources and the Ministry of industry and information technology, the total mining control index of tungsten concentrate (65% WO3) in China was 108000 tons in 2021, an increase of 3000 tons over the same period in 2020, a year-on-year increase of 2.90%. Among them, the main mining index was 80820 tons, with a year-on-year increase of 3.42%, and the comprehensive utilization index was 27180 tons, with a year-on-year increase of 1.23%. On the consumer side, the demand of manufacturing industry boosted the domestic tungsten consumption by 13%, and the total tungsten consumption in the whole year was 65000 tons, of which the consumption of various tungsten concentrates increased by 13% year-on-year to 55000 tons; The recycling of tungsten scrap alloy exceeded 10000 tons, with an increase of 11%. The overseas market increased by 55.16%, and China exported 24000 tons of tungsten raw materials (metal) of non cemented carbide in the whole year.

According to the industry statistics of China Construction Machinery Industry Association, the main manufacturing enterprises of construction machinery sold a total of 342784 sets / set of various excavation machinery products in 2021, with a year-on-year increase of 4.6%. Among them, 274357 units were sold in the domestic infrastructure market, with a year-on-year decrease of 6.3%; Due to the increase of rigid demand for construction machinery due to economic recovery in the international market, the export sales volume of China's construction machinery was 68427, with a year-on-year increase of 97.0%. In addition, according to the statistics of China Automobile Industry Association, as the world's largest automobile market, China's automobile production and sales were more than 26 million in 2021, with a year-on-year increase of more than 3.0%; In the field of 3C, the overall domestic notebook computer panel market increased by about 26% in 2021, and the sales volume reached 287 million pieces. The global shipment of tablet computers outside China was 170 million units, a slight increase of 3%; In 2021, the overall shipment volume of domestic mobile phone market was 350 million, with a year-on-year increase of 14%. The annual shipment volume of global smart phones was 1.355 billion, with a year-on-year increase of 5.7% (data of IDC).

In the market atmosphere where the mining and beneficiation forces did not increase significantly, but the demand side rose synchronously with economic growth, the average price of domestic wolframite concentrate (65% WO3) was 102500 yuan / ton in 2021, an increase of 20.95% over the same period in 2020; The average price of apt was 154400 yuan / ton, an increase of 21.06% over the same period in 2020. The prices of other tungsten products are also rising, showing increases of different ranges. The annual price increase of all tungsten products is more than 20% on average. A small number of high-end tungsten products that are not included in the overall statistics, such as nano tungstic acid, refined ammonium metatungstate, purple tungsten, cesium tungsten bronze, etc., have increased significantly.

1.2.2 China’s General Control "Valve" of Tungsten Raw Materials in 2022

1.2.3 New Project in China are Veritable "Big Stomach King" of Tungsten Raw Materials

1.3 China's Infrastructure is Heating Up

1.3.1 China's Ddomestic Infrastructure Demand

1.3.2 Demand for 5G and New Energy Vehicles

1.3.3 Reconstruction of Afghanistan and Ukraine

1.3.4 Global Inflation and China's CPI

2．Direct Costs Affecting the Market Price of Tungsten Products

Since 2021, China's tungsten concentrates and other raw materials have increased by more than 20%. The annual average price in 2021 was 103000, and other tungsten products have also increased by about 20% in the same period. Since 2022, after a short period of slight decline and fluctuation, tungsten concentrate has been maintained at about 118000. The price is close to 2013, that is, the high price period nearly 10 years ago. We have made a detailed analysis and prediction in 2021. The main factors can be seen in the analysis articles at that time. This time, the price of tungsten products increased slightly. In addition to the high level of raw materials, from the micro level, at the front of the tungsten products industry chain, the price of auxiliary materials in the production process of tungsten chemicals, such as flake alkali, hydrochloric acid, ammonia and other main consumption auxiliary materials, increased by more than 200% continuously in 2021. Accordingly, other auxiliary materials also increased to varying degrees.

Reference：

......

Based on the investigation and analysis of the main factors affecting the price of tungsten products, the basic conclusion is that the prices of food and energy will rise significantly in the foreseeable period from 2021 to 2022, and the raw materials, main auxiliary materials, power energy and pollution control costs for the production and processing of tungsten products will increase significantly. In addition, the cost of human resources will accelerate the process of urbanization and reduce the labor population in China Under the trend that the payment of capital and social security benefits only increases but not decreases, we can predict that the price of tungsten products will continue this trend and continue to rise in 2022 after rising in 2021!

(Part IV unfinished, to be continued)

SUMMARY

Based on the experience of tungsten products market in the past decades and the current situation of the conflict between Russia and Ukraine, the author believes that the price of tungsten products will continue to rise in 2022, but the main factor is not traditional market factors; Therefore, in the first part, we focus on the conflict between Russia and Ukraine and the military use and importance of tungsten products. In the second part, we focus on the global resource distribution of tungsten products, especially the general situation of Russian tungsten resources and the relationship between China's tungsten products industry and Russia; The third part analyzes the factors of the sharp rise in the prices of energy, bulk metals and grain and the cost pressure of China's tungsten market under the background of the conflict between Russia and Ukraine; In the fourth part, we analyze in detail the market trend of tungsten industry under the background of war and sanctions from the perspective of macroeconomic factors and processing cost of tungsten products, and comprehensively analyze the main factors and possibilities of rising and falling prices of tungsten products in 2022; At the same time, we will also discuss the feasibility and risk of China's tungsten products futures; Since it is related to Russia, finally, we will briefly analyze the suspected fraud such as the so-called sky high price Russian tungsten gold bars that have appeared from time to time in the past few decades.

Read/download the full report:

如您對相關(guān)產(chǎn)品感興趣或想銷售您的產(chǎn)品，請聯(lián)系我們：