Tungsten crunch can be fixed before prices spike further: BMO
BMO Capital Markets analysts warn that China's export restrictions and declining global mine output have created a tungsten supply squeeze, but maintain that the market can rebalance before prices spike significantly higher. The critical mineral is essential for high-temperature applications and defense manufacturing, making supply disruptions a key concern for industries dependent on stable tungsten availability.
The global tungsten market faces mounting pressure from supply-side constraints, yet industry analysts at BMO Capital Markets suggest there is still a window of opportunity to prevent severe price escalation if market participants act decisively. China's tightened export controls, combined with underperforming mine production globally, have created a notable supply deficit that threatens downstream industries reliant on this critical mineral.
Tungsten's importance extends across multiple industrial sectors, making supply disruptions particularly consequential. The mineral serves as an essential component in high-temperature applications, including aerospace and defense manufacturing, electronics production, and specialized industrial tooling. Its unique properties—including the highest melting point of any metal at 3,422 degrees Celsius—make tungsten irreplaceable in many applications, leaving industries vulnerable to supply shocks and price volatility.
China's dominance in tungsten production and processing has been a defining characteristic of the global market for decades. The country controls approximately 80% of global tungsten reserves and historically has been responsible for a significant portion of global production and refining capacity. Recent Chinese export restrictions, implemented as part of broader critical minerals policy, have effectively constrained the flow of tungsten to international markets. These restrictions reflect Beijing's strategy to secure supplies for domestic industries while leveraging market control as a geopolitical and economic tool.
Simultaneously, global tungsten mine output has underperformed expectations. Production from key mining regions, including Canada, Peru, and Russia, has declined or stagnated due to various factors including operational challenges, lower ore grades, and insufficient investment in new capacity. This dual supply constraint—reduced Chinese exports paired with weak international mine output—has created an increasingly tight market environment.
BMO's assessment that rebalancing remains possible before prices spike dramatically reflects several potential interventions. First, increased investment in non-Chinese tungsten mining capacity could expand global supply over the medium term. Several exploration and development projects remain at advanced stages and could be accelerated with sufficient capital commitment and regulatory support. Second, recycling and recovery programs for tungsten from end-of-life products and industrial scrap could meaningfully supplement primary production. Historically, recycling has been underdeveloped relative to its potential.
Third, demand management and efficiency improvements across consuming industries could ease supply pressure. Companies may optimize tungsten usage, develop substitutes where feasible, or implement production efficiencies that reduce per-unit consumption. Fourth, policy interventions in key consuming nations could promote strategic reserves or supply agreements that stabilize markets without requiring dramatic price increases.
The urgency of addressing tungsten supply constraints reflects broader concerns about critical minerals vulnerability. As governments and industries transition toward clean energy and advanced technologies—particularly in defense and renewable energy sectors—demand for specialized minerals like tungsten is expected to grow substantially. Failure to rebalance supply now could result in future supply crises with significant economic and strategic consequences.
BMO's cautiously optimistic assessment suggests that while the tungsten market faces real challenges, coordinated action among producers, consumers, governments, and recyclers could prevent the kind of price spikes that characterize true supply crises. However, this window of opportunity may be narrow, making prompt action essential for market stability and industrial continuity.