European ammonium paratungstate (APT) prices are rapidly approaching $280 per mtu and could soon breach $300 per mtu, as neither traders nor consumers see prices falling in the short term.
European APT rose to $270-273 per mtu on Wednesday from $266-271 previously, and offers are already above the new range.
“It’s all looking incredibly strong, and there will not be a correction for some time,” a trader said. “The days of cheap tungsten are long gone and we’re entering new territory now.”
The trader bought two containers at $270 per mtu, while a second trader booked a deal at $271. Both told MB that those prices were no longer available, with the first adding that he had an offer out at $276 and would not accept a lower price, while offers out of China are as high as $280.
The catalyst for higher prices in APT has been higher concentrate prices out of China, the largest supplier of tungsten concentrates to the global market.
Chinese tungsten concentrate basis 65% WO3 is trading at 93,000-94,000 yuan ($13,956-14,106) per tonne, from $84,000-85,000 yuan at the beginning of September and 68,000-69,000 yuan at the beginning of the year.
“The rising concentrate price in China is partly due to rising costs and partly due to the sentiment among producers,” a second trader said.
The strengthening of the yuan seen over the past two months – from 6.66 to the dollar on October 25 from around 6.81 at the beginning of September – and the tightening export licences could see APT soon breaching $300 per mtu in Europe, he added.
“There’s a good chance that it could,” he said. “The Chinese are now regularly talking about prices above $300. It’s not there yet, but it doesn’t have far to go.”
Though some buyers may question a further $25 per mtu price rise, when set against the recent performance of other noble alloys, suppliers say it does not seem such a stretch.
Considering that European APT prices are quoted in mtus and not kgs, the distance to $300 seems much smaller, the second trader said.
“Blue tungsten oxide is priced in kgs and is now at around $27.80 per kg,” he said. “When you’ve seen how quickly the nobles move, going from $27.80 per kg to $30 per kg is not a big leap, and buyers have to come to grips with that.”
In the past few months, for example, ferro-molybdenum has gained $2 per kg and then lost $2 per kg, with each move taking just three weeks. Ferro-molybdenum was trading at $39.50-40.50 per kg on Wednesday.
There is nothing to suggest that prices will not continue to strengthen through the rest of the year and into 2011, market participants said.
“Until there are enough concentrates coming out of the ground to alleviate the tight situation, or the situation where Chinese producers can do what they want, it all means one thing – higher prices,” a consumer said. “As long as demand stays where it is, there is no reason for the rally to stop.”
As well as higher prices for mined concentrates in China, domestic demand is also rising, further sapping export volumes that have already been diminished by falling export quotas.
“Straightforward internal demand in China is rising even if the economy has slowed a bit,” the first trader said. “But even if it slows to 7.5% growth, that’s still a hell of an increase in tungsten consumption, and imports of concentrates into China have fallen as well, so the pressure is really on.”
The all-time high in MB’s European APT price quotation is $285-295 per mtu in July 2005, while the last time the price breached $280 was in April 2006.
On each of those occasions, the price was considered to be overdone and a correction duly followed.
“The last time prices were up here it was overcooked, and there was a correction,” the first trader said. “This time it is not overcooked. The demand is there.”
So long as that demand is maintained, APT prices are unlikely to fall substantially until new supply sources are brought online, and that could be some way off.
“There is not sufficient concentrates coming out of the ground to stop it,” the consumer said. “Every mine that could potentially open is being opened, and others require a lot of investment. That certainly needs to happen if we are to get relief from the tight supply situation.”