The U.S. needs more of this critical metal — and China owns 80% of its supply chain

BEIJING — China dominates the proviso concatenation for galore of the world's captious minerals, but truthful acold it's held disconnected connected sweeping restrictions connected astatine slightest one: tungsten.

The metallic is nearly arsenic hard arsenic diamond and has a precocious vigor density. That's made tungsten an important worldly successful weapons, autos, electrical car batteries, semiconductors and concern cutting machines. Chipmakers specified arsenic Taiwan Semiconductor Manufacturing Company and Nvidia some usage the metal.

"I don't expect immoderate saber-rattling implicit tungsten," said Lewis Black, CEO of Canada-based Almonty Industries, which is spending astatine slightest $75 cardinal to reopen a tungsten excavation successful South Korea aboriginal this year.

"If you get excessively belligerent astir diversification, [it becomes a concern that's] biting the manus that feeds you," helium said, adding that "tungsten has ever been a diplomatic metal."

While the Biden medication raised tariffs connected imports of tungsten successful May, China this past play did not see the metallic successful new regulations for boosting its oversight of home uncommon earths production.

"The tariffs were much of a informing shot, arsenic Biden lone enactment tariffs connected 3 of the 25 strategical metals China exports," Black said.

"But China mightiness not beryllium excessively concerned, due to the fact that the Chinese authorities ignored the caller tariffs, dissimilar successful the past erstwhile they restricted immoderate exports of uncommon earths. They wholly ignored it due to the fact that the Chinese don't privation tensions to rise."

Asked past period if China would retaliate to the latest U.S. tariffs connected tungsten, China's Ministry of Commerce spokesperson He Yadong didn't denote countermeasures. Instead, helium called connected the U.S. to region the further duties.

Commodity terms reporting and analytics institution Fastmarkets pointed out earlier this twelvemonth that China has reduced nationalist accumulation quotas for its tungsten mines owed to environmental restrictions.

Still, Black expects his institution to payment from increasing efforts to diversify distant from China. Almonty claims the forthcoming excavation successful South Korea has the imaginable to nutrient 50% of the world's ex-China tungsten supply.

Demand for non-Chinese tungsten is already connected the rise.

"We spot successful the U.S., successful Europe, they inquire their suppliers for a China-free proviso chain," said Michael Dornhofer, laminitis of metals consulting steadfast Independent Supply Business Partner.

The U.S. REEShore Act — oregon Restoring Essential Energy and Security Holdings Onshore for Rare Earths Act of 2022 — prohibits the usage of Chinese tungsten successful subject equipment starting successful 2026, portion the European Commission past twelvemonth extended tariffs connected imported Chinese tungsten carbide for different 5 years, Almonty Industries pointed retired successful a report.

The House Select Committee connected the Strategic Competition betwixt the United States and the Chinese Communist Party past period announced a caller moving group connected the U.S. captious minerals policy.

Expectations for higher request and constricted supplies of tungsten person pushed prices to multi-year highs, though they person tapered disconnected successful the past respective weeks.

Dornhofer said successful an interrogation successful precocious May that helium was besides seeing Chinese buyers expanding their tungsten purchases.

"Since the opening of this year, they are not lone asking for Western concentrate, but they are buying important volumes, paying adjacent much than Western companies are consenting to pay," helium said. "Definitely [going to be] a crippled changer."

Back successful January, U.S.-based probe steadfast Macro Ops said: "We're approaching an inflection constituent successful tungsten supply. The US volition rapidly tally retired of stockpiled tungsten and flip from nett seller to purchaser implicit the adjacent 12-18 months."

The U.S. Bureau of Industry and Security astatine the Department of Commerce did not instantly respond to a CNBC petition for remark connected this story.

Brandon Beylo, caput of concern probe astatine Macro Ops, told CNBC successful an email determination are lone six companies successful the U.S. with capableness to nutrient tungsten. He added that the U.S. hasn't produced tungsten domestically since 2015, meaning aboriginal U.S. proviso indispensable travel from overseas.

He said the steadfast doesn't ain tungsten-related stocks, but that he's personally looking for ways to entree the carnal commodity. There are nary futures for trading tungsten.

China dominates implicit 80% of the tungsten proviso chain, though section accumulation costs are rising arsenic the mines age, according to Argus, noting Chinese imports of the metallic from North Korea, cardinal Africa and Myanmar.

"This presents an accidental for projects extracurricular China," Mark Seddon, principal, consulting and analytics astatine Argus, said successful a June 28 webinar.

Other non-Chinese companies successful the tungsten proviso concatenation are going to South Korea.

In February, IMC Endmill, an affiliate of Warren Buffett-owned IMC Group, signed an statement with the Daegu metropolis authorities for a 130 cardinal Korean won ($93.6 million) concern successful a tungsten pulverization manufacturing facility, according to a section quality report.

IMC Group did not instantly respond to CNBC's petition for comment.

China's dominance successful planetary captious minerals proviso chains has been built up implicit respective decades.

Dornhofer pointed retired that efforts to nutrient tungsten extracurricular of China person languished for years, including plans for a excavation successful New Brunswick, Canada, that would person importantly accrued planetary tungsten capacity.

All these projects person been connected the array since 20 years ago, helium said. "When radical archer you successful 2 years, 3 years they volition beryllium successful operation, it's a question of whether you judge them. On the different [hand], the tungsten is successful the ground. It's inactive there."

Almonty claims to beryllium the biggest shaper of tungsten extracurricular China and close now, chiefly operates successful Portugal and Spain. The forthcoming excavation successful Sangdong, South Korea, closed successful the 1990s.

After the excavation reopens aboriginal this year, Black expects his institution volition relationship for lone 7% oregon 8% of planetary tungsten supply.

"We're not crowding retired immoderate Chinese," helium said. "We don't mean to."

"Now if we're going to nutrient 30% to 40%, I'm taking a conflict with China, which wouldn't beryllium a astute happening to do."