In 2018, the tungsten industry maintained a stable operation. Due to the direct damage of Sino-US trade friction on tungsten exports and the indirect drag of the downward trend of 3C, automobile and other tungsten consumption-related industries, exports and prices declined in the second half of 2018, and the economic benefits of the tungsten industry declined. Some tungsten enterprises still suffered losses, and the differentiation of their profitability intensified. Therefore, the foundation for a better economic situation of the industry needs to be further consolidated.
According to the statistics of China Tungsten Association, in 2018, the operating revenue of 125 major tungsten enterprises increased by 18.04% year-on-year, 2.24 percentage points slower than that of the first three quarters of 2018; The revenue of main business increased by 18.51% year-on-year, 2.73 percentage points slower than that of the first three quarters of 2018; Realized profit and tax increased by 23.18% year-on-year, 13.78 percentage points slower than that in the first three quarters of 2018; The total profit grew 29.57 percent year on year, 12.1 percentage points slower than the growth in the first three quarters of 2018. By industry, tungsten ore, hard alloy and tungsten iron to achieve a large margin of profit growth, tungsten smelting and tungsten material processing profit declined.
In 2019, the tungsten market and tungsten electrode and rod supply will continue to tighten in a stable state. The price of tungsten concentrate is affected by the decline of resource grade, the rise of cost and the increasing pressure of safety and environmental protection. There are still many uncertain factors in the market, the downstream demand growth slows down, and the market demand pressure is still large. The price of APT, powder and other intermediate products of tungsten and end products such as hard alloy and tungsten material is under pressure, and the possibility of a substantial rise is unlikely. The tungsten market price is expected to continue to operate in a relatively reasonable range.
From the supply side, first, the domestic supply of tungsten raw materials is stable and tight. Due to the influence of policy control, resource endowment, mining cost, safety and environmental protection and other factors, the output of main tungsten mining and comprehensive utilization decreased, and the output of mineral product processing shrank. The increase of main tungsten mining output due to technical reform in some areas will be offset. The renewable utilization of secondary resources increased steadily, but the impact on market supply was limited. Second, the output of foreign tungsten concentrate remained stable. Under the current situation of global economy and tungsten market price, it is still difficult to recover the discontinued mines in foreign countries (for example, the tungsten Mine in Cantung Mine in Canada has been suspended since December 2015 due to high cost, while the tungsten mine in Hermerdon in the UK has only achieved half of its production capacity after being put into operation in September 2015, and has been suspended since October 2018). Slow progress in new projects (e.g., the Mactung Mine in Canada has yet to be developed for tungsten, and Almenty currently has only three of its five tungsten mines, including those under construction or out of production; Shangdong tungsten mine in South Korea is still under construction) and Niu Phao tungsten concentrate production in Vietnam remained stable; The output of tungsten concentrate in Bolivia and Austria was small and remained stable. Mongolia tungsten concentrate output decreased significantly; The output of tungsten concentrate in North Korea increased greatly. Tungsten concentrate production is low in Rwanda, Australia and Brazil. Third, foreign reserves and inventories are still at historic lows. The strategic tungsten reserve of the United States has declined, while that of Russia is very low. Affected by market uncertainties such as Sino-US trade friction, foreign tungsten enterprises are cautious in purchasing and controlling inventory.
From the demand side, in 2019, the tungsten market and tungsten electrode, tungsten rod, tungsten wire demand will continue to maintain a low growth trend. First, our economy is stable in general with steady improvement of quality and efficiency. The purchasing managers' index of manufacturing industry continues to stay in the boom zone. In particular, high-tech manufacturing industry and equipment manufacturing industry, infrastructure construction and private investment continue to grow, which will continue to drive the tungsten market demand. Second, as the Sino-US trade friction turns a corner, the confidence of the international tungsten market has recovered. Although the demand of the foreign tungsten market has weakened, it is expected to maintain a stable situation. U.S. GDP is expected to surpass $20 trillion for the first time in 2018, the fastest growth in nearly four years. Unemployment is at its lowest since 2000, consumer confidence is at its highest since 2000, and the number of RIGS and manufacturing orders are up. In the 2017/2018 fiscal year, Kenner achieved sales revenue of $2.368 billion, up 15.04% from the previous year, and net profit of $200 million, up 307.38% from the previous year. Although the economy of the 28 EU countries has slowed down somewhat, it is generally sound. Consumption and market confidence are still at high levels. GDP growth is expected to remain at around 2.1% in 2018. Sandvik recorded 12 consecutive months of record orders, revenue, and adjusted operating profit and cash flow in 2018, with full-year order volume up 9.0% from the previous year. The mining and rock drilling technology and materials technology segments saw double-digit growth in orders, with strong growth in most regions, and single-digit growth despite a slowdown in machining solutions, mainly due to lower orders in Asia and a slowdown in the automotive industry. For the full year, operating revenue was SEK10.072 billion, up 11.0% year on year, and operating profit (adjusted) was SEk18.625 billion, up 27.0% year on year. Japanese cemented carbide production maintained growth, demand steady growth.
However, it should be noted that the tungsten market still faces many challenges and risks. First, the world economy is undergoing new changes and variables, with increasing uncertainties, weak growth drivers and fluctuating commodity prices. Some international institutions have lowered their forecasts for world economic growth this year and next. Despite the turning point in Sino-US trade friction, the indirect impact on the tungsten industry should not be underestimated. Second, the business risk deserves attention. First of all, the implementation of the negative list for market access, environmental protection tax, resource tax and other policies, as well as the demarcation of ecological protection red lines, and the strengthening of production safety and environmental protection supervision are facing unprecedented pressure. In particular, the prevention and control of pollution from tungsten smelting, the reduction of tungsten slag, and the recycling and harmless use and disposal of tungsten are facing unprecedented pressure. Secondly, the registration of change of production scale of mining rights should be cancelled. Mine capacity expansion, especially the capacity expansion of small mines less than 30,000 tons, should be paid attention to. The third is to "ban small and large" access to tungsten mining market, which will be conducive to the replacement of old mine resources, promote the large-scale and intensive mining of tungsten resources, and protect the ecological environment, but will also bring certain pressure to the total control of tungsten mining. Fourth, market competition is intensifying. Tungsten industry, tungsten electrode, tungsten rod and tungsten wire are in a key period of industrial transformation and high quality development, facing both development opportunities and severe challenges. The concentration of tungsten industry is not high, mid - and low-end production capacity is still excess, industrial structural contradictions are still prominent, the homogenization competition of mid - and low-end products will be further intensified, and the profitability of enterprises will be further differentiated.
