Trade tensions between the U.S. and China have hit the tungsten market hard.
The price of the metal has shot up 300% over the past year or so, according to the CRU Group. That inflation has less to do with tariffs than it does with another weapon in the global trade war: export controls.
A big reason tungsten is unique is that it has a very high resistance to heat.
“And so that makes it ideal for handling the temperatures required to melt other metals without it melting itself,” said Chris Blench, CEO of Mavericks Manufacturing Partners, a company near San Diego that makes components for the energy and defense sectors.
Blench said tungsten is commonly used as the electrode when welding parts for those sectors.
“All of our aircraft, missile systems, the nuclear power plants for submarines and aircraft carriers, they’ll use a lot of this particular kind of a process, using tungsten,” Blench said.
About once a month, Mavericks Manufacturing Partners orders a 10-pack of tungsten electrodes, which are the thin rods that go into welding tools. But last fall, the company noticed that prices were starting to rise. Joe Thompson, the company’s chief operating officer, loaded up on a year’s supply.
“At that time, it wasn’t really a huge cost,” Thompson said. “But we can stock it.”
Thompson said that ended up being the right call. Prices of those 10-packs have more than tripled in the time since.
That’s partly because there’s a lot of demand from the defense sector. Tungsten is also used to make torpedoes and armor-piercing ammunition.
Nicola Sanesi, senior analyst with CRU Group, said demand is up partly because of the Iran war, and because Europe is spending more on defense.
“If we look at the particular example of Germany, we see that Germany is reconverting part of their manufacturing operations into military projects,” Sanesi said.
But the reason why prices have skyrocketed this year also has to do with supply, since China controls so much of the market.
“China has implemented export restrictions, meaning that only those who get a license can actually sell tungsten overseas,” Sanesi said.
China’s trying to hang on to its tungsten, along with other critical metals, to safeguard its own interests, said Leah Fahy, senior China economist with Capital Economics.
“But equally, the other key thing is that it’s been used as a bargaining tool, and a way of causing pain to the U.S. and the U.S.’s allies,” Fahy said.
