Since 2025, tungsten prices have skyrocketed. The price of 65% wolframite concentrate has soared 51.75% since the beginning of the year, exceeding 217,000 yuan/ton, and continues to climb. This surge in tungsten prices has put tool companies that rely on tungsten as a raw material at a crossroads, facing unprecedented challenges. Although China is a major global tungsten resource country, accounting for over 50% of reserves and contributing over 80% of production, the first mining quota for 2025 is only 58,000 tons, a year-on-year decrease of 6.45%. The quota for low-yielding areas such as Hubei and Anhui has been reduced to zero. At the same time, the grade of the mine has dropped from 0.42% to 0.28%, and the mining cost has exceeded 100,000 yuan/ton. Over 30% of small and medium-sized mines have ceased operations, and the domestic supply of tungsten ore is becoming increasingly tight. Internationally, the European Union has launched a second tender for a 20,000-ton tungsten reserve, and the US Department of Defense plans to establish a national tungsten reserve. The increase in international strategic reserves is further intensifying the global competition for tungsten resources. China’s resumption of exports of some regulated products has led to an arbitrage mechanism that has increased the correlation between domestic and international tungsten prices, pushing prices higher.

This surge in tungsten prices has directly plunged tool manufacturers into a cost crisis. Cemented carbide manufacturers have seen production cuts expand to 45% due to cost inversion, with gross profit margins for some tools falling below 10%. The appreciation of the RMB and the decline in export revenue have created a “scissors gap,” further squeezing profit margins. It’s estimated that a 20% increase in tungsten prices would translate to a roughly 6% increase in tool raw material costs. In an extreme scenario, assuming a tungsten price of 200,000 yuan per ton, tool costs are projected to rise by 20%. Faced with this cost pressure, leading domestic tool manufacturers such as Zhangyuan Tungsten, China Tungsten High-Tech, and Huarui Precision have all raised prices by 3% to 10% in an attempt to pass on the cost pressure. However, price increases are not a foolproof solution. End-user machine tools manufacturers, faced with rising tool prices, are likely to demand higher quality, a significant hurdle for smaller tool manufacturers with limited R&D capabilities and relatively weak quality control. Currently, the cost of silicon carbide cutting tools has dropped by 20% compared to the beginning of the year, with a replacement rate approaching 20% ​​in the cutting tool sector. Photovoltaic tungsten filaments also face the risk of being replaced by new materials such as silicon carbide. If costs drop another 10%, this could impact 35% of traditional demand. Against this backdrop, small cutting tool companies are facing increasing challenges, while leading companies are actively exploring solutions. Amidst these challenges, some cutting tool companies have begun exploring technological upgrades and innovations. For example, the introduction of a short-process, green smelting process for scheelite has reduced energy consumption by 20%, effectively lowering production costs. Other companies have reduced their tungsten oxide powder inventory to 0.96% through a “low inventory + fast turnover” model, minimizing capital investment and the risk of price fluctuations. Other companies have also improved their process by extending the use of ammonium paratungstate to the production of micro drills for printed circuit boards, significantly increasing their gross profit margin. On the product side, Jinzhou Steel Shank milling cutters, leveraging the synergistic innovation of high-strength welding technology and high-performance coatings, have earned customer trust in server and new energy vehicle board processing, offering the industry a cost-effective and high-performance option. In the short term, the commissioning of overseas projects in 2025-2026 will alleviate some supply pressure. However, shrinking Chinese production coupled with rigid demand will keep tungsten prices volatile at high levels. In the long term, the global supply-demand gap is projected to widen to 17% between 2026 and 2028, leading to a trend of rising tungsten prices, with breaking record highs becoming the norm. While the surge in tungsten prices has created a difficult winter for cutting tool companies, it has also become a catalyst for industry transformation. Amidst this challenge, technological innovation to reduce costs and increase product value, optimizing supply chain management to ensure raw material supply, and exploring emerging markets to find new growth points will be key pathways for cutting tool companies to navigate this difficult winter and usher in new opportunities.

What are your thoughts?