Macroeconomic Themes ~ Tungsten Stock Picks - October 2021
Our Equities Trader, Joseph Raad, discusses macroeconomic themes for the month of October.
Regarded as one of the toughest elements in nature, tungsten is a critical material in global markets and has been utilised for over 100 years. The 20th century saw a surge in tungsten as its strength and durability was used for tool manufacturing and construction. The most recent societal transition to modernisation and technological evolution, however, has forced the demand for the metal to decrease over the last number of years. Old fashioned tungsten lights are being replaced with LEDs and the electric vehicle boom has resulted in the greater adoption of other commodities, such as copper.
China is a dominant powerhouse for both global tungsten production and demand, equating to approximately 85% and 50%, respectively. Recently, however, the Chinese government has limited the number of mining and export licenses, imposed quotas on production, and restricted mining and processing. Due to such a monopoly, the United States Geological Survey (USGS) has named tungsten, alongside rare earths, cobalt, and more, as the minerals most at risk for disruptions of supply to the U.S. This potential supply deficit, coupled with the increased manufacturing output post-pandemic, has led many analysts to forecast a near-term rise in the underlying commodity price.
Global tungsten production in 2020 was at 84,000t, and, according to Steel & Metals Market Research (SMR), is expected to grow to 130,000t by 2027, with the construction and industrial sectors leading the way. Many global tungsten mines are expected to reach the end of their mine life this decade, meaning a new mine supply will be required to ensure a stable supply of the material.
“On the contrary, technological advancements and a global push towards decarbonisation will present many headwinds for the commodity moving forward, as a renewable energy surge depicts a threat to tungsten consumption. ”
Joseph Raad, Equities Trader, BPC
Many ASX companies have been active in trying to capitalise on the recent strength in commodity prices.
ASX listed King Island Scheelite Limited (KIS) is focused on the redevelopment of its 100% owned Dolphin Tungsten Mine located on King Island, Tasmania. Initially the focus is on producing a high grade tungsten concentrate, however plans are well advanced to value add the product for supply into the upstream tungsten industry.
Thor is an exploration and development company with an advanced tungsten / molybdenum project poised for development, a growing tungsten resource, an exciting copper development project, and very exciting gold/nickel & uranium/vanadium exploration projects. Thor is listed on the Alternative Investment Market (AIM) in London and the Australian Stock Exchange (ASX) both under the ticker "THR". Thor is also listed on the OTC Exchange in New York under the ticker "THORF".
Tungsten Mining NL (ASX:TGN) is an Australian based resources company whose prime focus is the exploration and development of tungsten projects in Australia.
The metal’s future outlook is quite an uncertain one to say the least, as inevitable demand for construction and industrial uses will clash with the global adoption of more eco-friendly standards.
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