Impacts of Russia-Ukraine Conflict on Tungsten Market & Price (IV-2)

IMPACTS OF RUSSIA-UKRAINE CONFLICT ONTUNGSTEN MARKET & PRICE

PART IV OF X

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

After talking about so much about the impact of raw and auxiliary materials, processing costs and price fluctuations related to the upstream and downstream of the tungsten products industry chain, we should talk about several important things that seem to have no direct relationship with tungsten products in the past period of time and have directly or indirectly contributed to the price of tungsten products from time to time. Because in the same period of time, the political and economic environment at home and abroad is the same, and there is no difference in energy and power, human resources, environmental protection and carbon reduction, raw and auxiliary materials. Therefore, they have the same price fluctuation market law and logic, and the difference may only be triggered by different sensitive events at different times. We hope to identify the direction by combing the recent price changes of relevant metal materials, so as to observe the future scene of tungsten products.

Different from the tradition, war, currency, epidemic and other factors can appreciate when buying a car. According to statistics, the overall price of used cars in the United States has increased by 30%. Tesla has increased the price of all models by 4%-10% in the United States. At present, many electric vehicle manufacturers in the Chinese market have also increased their prices one after another. Since 2021, the price of raw materials in the world has soared, and the price of raw materials for electric vehicles has begun to rise. The price of raw materials for power batteries represented by lithium carbonate has almost risen sharply recently, and the price of main raw materials for power batteries such as lithium, cobalt and nickel has increased sharply this year. In March, the comprehensive quotation of battery grade lithium carbonate market was about 500000 yuan per ton, while the price at the beginning of 2021 was only 50000 yuan per ton; The price of cobalt also increased from less than 300000 yuan per ton at the beginning of last year to nearly 600000 yuan per ton in March this year, nearly doubling. In less than two years, the prices of non-ferrous metals, in addition to the above lithium, cobalt and nickel, copper, aluminum, lead, zinc and rare earth have increased significantly, and the prices have almost doubled, putting huge cost pressure on downstream industries. At the same time, the average price of tungsten products has not increased significantly.

In the process of writing this article, new news is constantly updated. According to experts' estimation, the inflation rate in the United States may exceed 8% and the CPI in Europe may exceed 6% in March. According to the data released by China's National Bureau of statistics on March 31, the purchase price index and ex factory price index of main raw materials were 66.1% and 56.7% respectively in March due to the recent sharp fluctuations in international commodity prices and other factors, It was 6.1 and 2.6 percentage points higher than that of the previous month, both rising to the highest level in nearly five months.

From the perspective of the industry, the purchase price index and ex factory price index of main raw materials in upstream industries such as petroleum, coal and other fuel processing, ferrous metal smelting and calendering, nonferrous metal smelting and calendering exceed 70.0%, bringing great cost pressure to the middle and downstream industries. In the case of soaring raw material prices, affected by the cluster epidemic in many places in China and international geopolitical instability, China's Manufacturing Purchasing Manager Index (PMI) was 49.5%, down 0.7 percentage points from last month, and the overall prosperity level of the manufacturing industry fell. However, the highlight of China's data in March is that the PMI of high-tech manufacturing industry is 50.4%, down year-on-year, but in the expansion range. The employee index and business activity expectation index of high-tech manufacturing industry are 52.0% and 57.8% respectively, indicating that high-tech manufacturing industry has strong development toughness, and enterprises continue to be optimistic about the future market development.

3. "Irrelevant" But Closely Related Price Reference of Tungsten

If you spend enough time in the field of non-ferrous metals, especially refractory metals, you will imperceptibly and involuntarily pay attention to similar but seemingly unrelated metal products and prices of nickel, molybdenum, cobalt, rare earth, etc.

As mentioned earlier, in the consumption of tungsten products in China and the world, tungsten carbide powder used to produce cemented carbide accounts for 70% and 50% respectively. If we investigate its price with the most common cemented carbide brand yg10 (ISO K10), the composition is 90% tungsten carbide powder + 10% metal cobalt powder; Alternatively, if it is non-magnetic cemented carbide, the brand is yn10, that is, 90% tungsten carbide powder + 10% metal nickel powder; Or, the most common high-density tungsten alloy, the general brand is 80% - 97% tungsten content, the rest is nickel iron copper, and the most common tungsten alloy gold brand is 90wnife with a density of 18g / cm3.

It can be seen that although the proportion is small, the average price of cobalt, nickel or other rare earth metal elements accounting for 10% will also directly affect the price of cemented carbide when these metal binder elements’ price rise sharply, high proportion tungsten alloy, tungsten copper alloy, tungsten nickel alloy and other products under the condition of large fluctuation. On the other hand, when the prices of similar metals such as nickel and cobalt change greatly, the psychological panic and pressure of general inflation will also bring impact and rising psychological expectation to the price of tungsten products.

If we calculate the cost with a simple arithmetic method, if the price of raw materials such as nickel and cobalt increases by 200% (actually higher), that is, taking the cost increase of cemented carbide production of YG/YN10 as an example, it will increase by 10% x200% = 20%, and this figure may only be a conservative result.

3.1 Butterfly Effect of "Demon Nickel"

Nickel (Ni) is a hard and silvery white metal with good ductility and ferromagnetism. Nickel is mainly used in the production of nickel alloy, catalyst, electroplating, nickel cadmium battery, stainless steel and various alloy steels. It is widely used in the manufacture of various military and civil parts and components of aircraft, tanks, ships, radar, missiles and spacecraft. It is also an indispensable raw material in the fields of ceramic pigments, permanent magnet materials and new energy batteries.

According to the data of the United States Geological Survey (USGS), the global nickel resource reserves in 2021 were about 95 million tons, including 21 million tons in Australia and Indonesia, accounting for about 22.1% of the world, ranking first in the world; Brazil is 16 million tons, accounting for about 16.8%, ranking third; Followed by Russia, the Philippines and China, with reserves of 7.5 million tons, 4.8 million tons and 2.8 million tons respectively, accounting for 7.9%, 5% and 2.9% respectively.

In terms of output, the global nickel output in 2021 was about 2.7 million tons, of which Indonesia was 1 million tons, accounting for about 37% of the world, ranking first in the world; The Philippines is 370,000 tons, accounting for about 13.7%, ranking second; Russia is 250,000 tons, accounting for about 9.3%, ranking third; Followed by New Caledonia, Australia, Canada and China, with output of 190,000 tons, 160,000 tons, 130,000 tons and 120,000 tons respectively, accounting for 7%, 5.9%, 4.8% and 4.4% respectively.

On the day of writing this paper, March 17, 2022, the price of metal Nickel in the domestic spot market is 223,220-223,700 RMB Yuan/ton, and there is little difference between the markets in the north and the south. However, at this time, the prices at home and abroad, Lun nickel and Shanghai nickel still have huge exposure. During the suspension of trading of London Metal Exchange (LME), Shanghai Futures Exchange (SHFE) Shanghai Nickel still insisted on normal trading in the domestic futures market and assumed a certain price weathervane ding at a critical moment. As of the afternoon of the 16th, the main contract of Shanghai nickel rose 7.13% to 235,200 RMB Yuan/ton, with a weekly increase of 5.86%.

Previously, Ni of LME once broke through the 100,000 USD/MT mark in the intraday trading on March 8. As of the closing on March 8, Ni of LME offered 80000 USD/MT, about 500,000 RMB Yuan/ton; On the 7th, the closing price fell back to 50,300 USD/MT, equivalent to RMB 320,000Yuan/ton. In fact, the opening price of the main domestic Shanghai nickel contract on March 7 was less than 190,000 RMB Yuan/ton; but affected by this, as of March 9, many contracts of SHFE Nickel still received the soaring price of the triple board. On March 9, the closing price of SHFE Nickel on the day of the previous stock exchange was 267,700 RMB Yuan/ton.

In any case, the LME "Demon Nickel" incident raised the price of metal nickel in a short time, which did realize the ding of hedging, but also completely lost the fundamental starting point of price discovery. At the same time, the LME incident was seriously divorced from the actual supply and demand relationship in the spot market, resulting in the inability of upstream, middle and downstream customers in the industry chain to quote and trade, seriously disrupting the order of the international market. Although LME stopped trading and in recent days, all participants in the event actively coordinated to make it gradually calm, the " Demon Nickel War" not only highlights the huge demand for nickel for new energy batteries and other batteries, and the market has been under the pressure of shortage, but also shows us the impact of the conflict between Russia and Ukraine on the sensitive nerves of small metal markets such as nickel, cobalt, tungsten and molybdenum.

At present, it is difficult for the nickel price to recover to the long-term supply and demand price reached in the market before March 8, so all parties in the market will have to accept the high price of nickel, and the butterfly effect of its price rise will soon spread to the steel market and quickly respond to the price of tungsten products.

3.2 Tungsten's brother metal molybdenum

Molybdenum is a silvery white metal with a high melting point. Like tungsten, molybdenum is called refractory metal. However, the density of molybdenum is 10.23g/cm3, about half that of tungsten (19.36g / cm3). As an important industrial raw material, molybdenum and its alloys have a wide range of applications and good prospects in important departments such as metallurgy, agriculture, electricity, chemical industry, environmental protection, medical treatment, optoelectronics, chip manufacturing and aerospace. Molybdenum has become an important raw material and irreplaceable strategic material in the national economy.

It is reported that the global molybdenum resource reserves are 16 million tons, of which China ranks first in the world with 8.3 million tons...

Molybdenum metal is an important product of Chinatungsten Online, and it also provides information about molybdenum products and their market price trends. Interested readers can scan the QR code at the bottom of the page to follow our WeChat public account " chinatungsten ", and also You can visit our molybdenum products website www.molybdenum.com.cn for daily updated products, market prices, industry technologies and news.

3.3 Stock Disaster is not a "Cobalt Disaster"

At a time when China's A-shares are in mourning and reproduce the 2015 stock disaster, the price of metal cobalt has reached an all-time high, and both the stock disaster and valuation have aroused great concern in the market. However, the soaring price of cobalt raw material in the short term is the "cobalt disaster" of tungsten cemented carbide industry...

3.4 Rare Earth is Realy Expensive because it is Realy Rare

If I say that the prices of molybdenum, nickel and cobalt have increased one after another and are likely to affect tungsten products, if you have doubts, let's look at rare earths...

3.5 The Price of Tungsten has Become a "Depression" Among All the Metals

Similar to cobalt, nickel and molybdenum, the above reasons for the skyrocketing rare earth prices, such as new energy vehicles, mobile electronics batteries, environmental protection, wind power, Russian-Ukrainian conflict, epidemic disruption, supply chain tension, etc., are exactly what we are Factors that must be considered in analyzing the price of tungsten products and the market, this is also consistent with the logic of ferrous metal that has jumped up and down on a roller coaster since last year, and the price of coal has doubled. Of course, it is also understandable to some extent. The recent surge in oil prices to the $130 anomaly caused car owners to dizzy, although the author currently does not know how to calculate the proportion of the price increase from -40 to $130?!

Therefore, we can infer in the same way that after the prices of steel, coal, oil and natural gas and other energy, grain, copper, aluminum and other bulk commodities, cobalt, nickel, molybdenum, rare earth and other small metals all rise in turn in 2021, the price of tungsten products has become a "depression" of commodity prices in the market, and its future trend and trend are becoming more and more clear, which has also continuously attracted the high attention of insiders, stock holders of relevant listed companies and major fund managers. This is also an important basis for us to be bullish on the annual average price of tungsten products in 2022.

After talking so much, I feel a little confused: in the past two years, molybdenum producers have made tungsten money; The profit of tungsten rare earth is high; Stocks are almost dead, and the days of cobalt and nickel are very carefree!

(End of the Part IV of this paper, 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 Russian Ukrainian conflict 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 overview of Russian tungsten resources and the relationship between China's tungsten products industry and Russia. In this part, we analyze the factors of the sharp rise in the prices of energy, bulk metals, grain and other metals, cobalt, nickel the market and price of molybdenum and rare earth and their relationship with tungsten resources, and then analyze the judgment that no price will be affected by it. In the follow-up, we pay attention to the RMB exchange rate, the interest rate of the Federal Reserve and the possibility of RMB strength on the cost pressure of China's tungsten market, analyze the risk of tungsten industry and the involution of tungsten products industry from multiple angles, and analyze the necessity of the collection and storage of tungsten products in China; 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:

'Impacts of Russia-Ukraine Conflict on Tungsten Market & Price (IV-2)'

'Impacts of Russia-Ukraine Conflict on Tungsten Market & Price (IV-1)'

'Impacts of Russia-Ukraine Conflict on Tungsten Market & Price (III)'

'Impacts of Russia-Ukraine Conflict on Tungsten Market & Price (II)'

'Impacts of Russia-Ukraine Conflict on Tungsten Market & Price (I)'

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