China

Largely known as a popular material for wedding bands, it is a little-known and under-reported fact that tungsten is one of the hottest commodities these days.

While U.S. government agencies are miles away from speaking with one voice on the issue of critical minerals and metals, at least one agency, the Department of Commerce, has taken note of the strategic importance of tungsten and related issues in recent years. Here are a few points taken from its “Analysis of Tungsten,” contained in Appendix E of the Department of Defense’s 2009 Reconfiguration of the National Stockpile Report to Congress:

· Operation of the only tungsten mine in the U.S. was suspended in 1995 because of depressed prices, largely owed to high levels of production and exports by China.
· U.S. manufacturers get raw materials from concentrate imports and tungsten-bearing scrap as well as drawdown of National Defense Stockpile stocks of concentrate and powder.
· Tungsten ore and concentrate imports came mainly from Bolivia and Portugal between 1996 and 2007, Russia and Kazakhstan until 2000, Canada since 2002. Imports from China occurred between 2000 and 2003.
· For import of tungstates (produced from concentrate and undergoing chemical processing to yield metallic tungsten products), China has been main source.
· China has about two-thirds of global tungsten reserves, with government controlling production through ownership and regulation.
· China has increased its share of global concentrate production from 75% in 1995 to 85% in 2007, and is responsible for almost all of the 130% increase in global ore and concentrate output between 1995 and 2007.

Concluding, the report warns of consequences of China’ restrictive export policies, and states that:

Heavy reliance on imported material makes consuming industries vulnerable to fluctuations in the world price and availability of such inputs. China, for example, is a major producer of many of the materials for which the United States is heavily import reliant. (…)

With the increases in world demand for many materials, such policies, if widely adopted, could result in severe distortions of global markets and a difficulty for U.S. manufacturers to obtain raw material inputs in a timely and cost competitive manner.

That was three years ago. Unfortunately, policy makers on Capitol Hill are only now – and only slowly – realizing the scope of this problem. Here’s to hoping they’ll come up with something that isn’t too little, too late.

This week’s Critical Metals Report on the Gold Report’s website features an exclusive detailed interview with the latest expert to join the American Resources panel of experts: Jeffery Green, President and Founder of J.A. Green & Company, and Founder of the Strategic Materials Advisory Council.

Discussing the U.S. policy landscape against the backdrop of the latest WTO case against China put forth by the U.S., the EU and Japan, and lamenting that Washington doesn’t even have a coherent definition of strategic and critical minerals, Green argues that policy makers are missing the point about rare earth element supply. Green calls for the development of a coherent domestic supply chain for the United States to remain competitive. Here are some of the interview’s key points:

· As the U.S. mostly imports components and end products containing REEs (rather than the metals themselves), U.S. demand appears fairly low, creating the misleading perception that we can meet our own demand, which we can for the direct sale of some REEs, but not for phosphors, metals and other magnets.

· Consumers continue to turn to China for access to raw material supplies.

· U.S. policy on the issue remains piecemeal, with agencies working from different angles, and policy makers in Congress unable to set a coherent framework largely due to partisan politics.

· In light of China’s near total monopoly, free market forces alone are insufficient to sort out REE supply chain issues, as even with new sources of supply coming online, “significant portions of that supply chain will still be relying on China for key processing technologies and intellectual property.”

· The WTO case is unlikely to increase REE supply.

· The current trend of metal processors moving to China is a big concern, as assembly makers, and ultimately end-product users will likely follow. The lighting industry, in which the majority of production already takes place in China, is a case in point. If the REE field goes down this trajectory, U.S. stands to lose economically, and runs the risk of intellectual property leakages.

Green shares a lot more insight, so read the rest of the interview here.

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