Tungsten's 7x Surge in 2 Years… Why?

In particular, tungsten has emerged as a prime example of resource weaponization amid the conflict between China and the United States, leading to increased supply chain instability.

Tungsten boasts the highest melting point of all metals, at 3,422 degrees Celsius, more than double that of iron. This extreme heat resistance makes it the metal best able to withstand intense flames among those discovered by humanity.

Furthermore, tungsten possesses a high density of 20kg per liter and hardness comparable to diamonds. Based on these extreme physical properties, it is utilized as an essential material in various advanced industries.

Tungsten, with its unique hardness and heat resistance, plays a crucial role in various industrial sectors. It is essential for manufacturing cutting tools and drill bits used to cut and bore metals, virtually involved directly or indirectly in most manufacturing processes.

It has become an indispensable mineral for building critical infrastructure in advanced industries, particularly in the defense sector, where it is used for missile and rocket engine nozzles that must withstand extreme heat and pressure, and as a wiring material connecting transistors in semiconductors.

This figure significantly surpasses the 196% increase observed for tantalum, which is used in superalloys.

Compared to copper, often considered a barometer of industrial activity, which only rose by 44%, tungsten's price surge is an unusual phenomenon, suggesting complex factors beyond mere demand increase are at play.

As tungsten supply shortages deepen, a strange phenomenon has occurred where the price of recycled raw materials from waste has surpassed the spot price of new ore. Particularly in the U.S. market, restrictions on tungsten scrap imports have led to a sharp increase in the price of recycled materials.

This reflects the maximum increase in resource value due to surging demand and limited supply of tungsten. The fact that recycled material prices have exceeded Rotterdam spot prices further highlights market instability.

China holds an overwhelming share of the global tungsten market, effectively enjoying a monopolistic position. China accounts for 79% of tungsten mining, meaning it controls most of the world's supply.

In particular, China's share of the APT (Ammonium Paratungstate) market, an intermediate product of tungsten, reaches 85%, forming an almost monopolistic supply chain structure. This dominant position allows China to exert immense influence over tungsten prices and supply.

In February last year, China initiated tungsten export controls, signaling a move toward resource weaponization. This immediately impacted global supply chains and was a major cause of the tungsten price surge.

China's monopolistic position and export controls are causing severe supply chain instability for countries highly dependent on tungsten, with nations now scrambling to secure alternative supply sources.

Due to China's tungsten export controls, some Japanese material companies have halted the production of tungsten hexafluoride for semiconductors, leading to a ripple effect benefiting South Korean companies like SK Specialty and Foosung. SK Specialty, in particular, saw a significant improvement in performance, recording an operating surplus of 87 billion won in the first half.

Foosung also achieved an operating profit of 32 billion won in the first half, double that of the previous year, showing positive performance for domestic companies amid global tungsten supply chain instability.

With China dominating most of the world's tungsten supply, China effectively holds the leash of the global tungsten ecosystem. While China currently supplies tungsten export volumes to South Korea, this structure inherently carries the risk of supply chain disruption at any time.

If China were to suddenly halt exports, South Korean companies, like Japan's Kato Tangga and Central Glass, could suffer severe impacts. This clearly demonstrates the structural limitations and risks of a tungsten supply chain highly dependent on China.

Currently, China holds the largest share of global tungsten reserves at 52%, followed by Australia at 12%, with Russia, Vietnam, and Spain trailing behind.

Accordingly, Australia is pushing to expand production at its Queensland mines, and the UK is proceeding with plans to reopen the Hemerdon mine in Devon after 8 years. Kazakhstan is also pursuing tungsten mining and processing projects, as various countries increase investment to stabilize tungsten supply.

The tungsten produced at Sangdong Mine at that time greatly contributed to the country's foreign exchange earnings and was a major source of funding for the establishment of Pohang Iron and Steel Company.

However, due to the offensive of low-priced Chinese tungsten in 1994, profitability deteriorated, and it regrettably closed. This reactivation offers new possibilities for South Korea's resource security in the current situation where the strategic value of tungsten is being re-evaluated.

Almonty, the operator of the Sangdong Mine, has now moved its headquarters to the U.S. As a Canadian company, it has already secured a contract during the investment attraction process to exclusively supply 90% of its production to GTP, a U.S. defense company, for the next 21 years.

This means that while the tungsten from Sangdong Mine is buried on South Korean soil, it falls outside the direct control of South Korea within the actual supply chain. However, there is still room for South Korean companies to secure some volume when production expands next year, and molybdenum, which is mined along with tungsten, is contracted to be supplied to South Korea's SeAH Group, indicating it will contribute to domestic industry to some extent.