FARMINGTON HILLS, Mich. () -- Tungsten is a strategic metal for industrialized nations. It is vital to the production of high-speed cutting tools and alloys capable of maintaining their strength at high temperatures. There are few if any viable substitutes for tungsten in many critical applications. China today produces 80% of the world's tungsten. The trouble with tungsten is that Chinese domestic demand is overtaking supply.
The United States has hundreds, if not thousands, of sites on which commercial quantities of tungsten have been identified. The website TheWeekendMiner.com lists hundreds of such sites just in California. Some are former operating mines closed due to the activity of environmentalists or, before that occurred, closed due to low tungsten prices, but now unable to reopen due mainly to environmental issues. Others, simply, were never opened or the start up of which, although it might now be feasible economically, has been halted by environmental issues raised by activists.
A friend of mine who is a strategic sourcing specialist for a Fortune 500 company likes to say that there are three ways to stop the production of a natural resource in America:
- Raise environmental issues;
- Lower the price of imports, i.e., exercise predatory pricing, or;
- Find a cheaper substitute for the material.
A combination of factors 1 and 2 above completely stopped the mining of tungsten in the United States by the 1990s. And, as the Chinese have learned and practice to their advantage, once environmental issues are raised in the U.S. they never go away. Predatory pricing doesn't always work, because it reduces revenue for everyone not just the targeted industry, but once you add environmental issues you can then raise back the price to your heart's content, because in America environment trumps economic value in mining every time.
Canada is a different story. It has a company, North American Tungsten Corporation [TSX:NTC], that by virtue of a single mine, the CanTung, in Canada's (Federal) Yukon Territory, is the Western World's largest tungsten producer. CanTung is currently producing at an annualized rate of 3,000 MT per year of tungsten from ore that is typically 1.6% of WO3. World production of tungsten is between 60,000 MT and 80,000 MT per year.
CanTung has had a checkered history, however. Discovered only in 1954 it has since opened and closed several times and had two or three different owners. It closed most recently in 2003 and reopened in 2005. Its continued operation depends on the market price of tungsten remaining high, and it looks like the expansion of heavy industry globally has finally created enough demand for tungsten to permanently keep the metal's price high enough to insure the future of CanTung. The output of CanTung is not dedicated to the North American market. It is sold to the customer willing to pay the highest price. Lately, more and more these customers have been in Asia.
The United States industrial usage of tungsten is today around 20,000 MT per year. Around 15,000 MT, 75% of the total is now imported. The balance, 5,000 MT, or 25%, is recovered domestically by recycling from scrap. This is a very sharp drop even from as recently as 2000 in which year a USGS report, issued in late 2005, estimated that U.S. industry got 46% of its needs from the recycling of scrap containing tungsten.
America today produces no tungsten from domestic ore. Even in a situation where all of North American Tungsten Corporation's output would go to American customers the U.S. would still be importing 60% of its needs from China.
The Chinese domestic economy, however, is absorbing more and more tungsten each year. China is rapidly eliminating the export subsidies it used to pay its tungsten producers, and it has closed almost half of the mines we know about. This has been said to be due to exhaustion of the ore deposits or of government regulations.
What is tungsten used for?
- High strength high speed steel for cutting, stamping, and casting tools and dies;
- Alloy steel armor for military vehicles and naval warships;
- Specialized armor piercing ammunition for the U.S. military;
- High temperature coating materials used in the construction jet engines;
- High temperature materials used in the construction of nuclear weapons;
- Filaments for incandescent lamps, and;
- Some very special surgical instruments.
How many of these areas can we outsource without endangering our economy or national defense?
We can use molybdenum (Mo) for some of the applications, but we are now already 100% dependent on imports for Mo metal and alloys due to U.S. environmental concerns about smelters. Mo concentrates that are produced in the U.S. are shipped to China for smelting and refining. Tungsten mining in the U.S. has ended completely due to predatory pricing and environmental issues.
The remaining light in the U.S. is that we still have long experienced companies that process tungsten containing scrap to recover the tungsten values and further process that into new material for industrial use. Osram Sylvania in Towanda, Pennsylvania (today owned by Siemens [NYSE:SI] of Germany) and Buffalo (New York) Tungsten Incorporated, a private venture, are two major companies still capable of processing tungsten ore as well as scrap in the U.S.
These companies and a few smaller ones maintain America's ability to work tungsten (and other refractory metals as well). They have a bright future, because the demand for tungsten products is increasing much faster than the supply can be developed.
A last thought to keep in mind when you think about tungsten is that in order to armor plate our warships and tanks we need tungsten. Strategically speaking is it better if we push hard to develop environmentally friendly mining processes in the United States or should we just ask the Chinese to keep supplying us even if we should go to war with them or with one of their allies such as North Korea? Perhaps Senator Reid of Nevada who calls himself a friend of safe American mining might let us know what he thinks we should do?
The best way to invest in America's future is to reopen our strategic metal mining industry. Why not start with tungsten?