Sunday, April 24, 2005

TUNGSTEN = HEAVY STONE

Under the business section of the April 16th issue of the Economist, you could read an article (Hard luck) on the price development of tungsten metal. I have purchased tungsten welding electrodes, so I got interested in reading the article. Higher raw materials prices is one of the top trends according to Inc. Magazine.

  • High prices on raw materials.
During my 8+ years as a purchaser of raw materials, I had several price negotiations with suppliers. I have seen e.g., nickel and stainless steel prices going "thru the roof." The solution is to find alternative sources for the future and at the same time work in a long-range fashion with your current partners. It was important to point out to the suppliers that the business relationship was based on the "trader principle." For my take on the problems with steel tariffs, read my post, "ASSOCIATED STEEL" VERSUS "REARDEN STEEL"? (EGO, FIVE TRENDS ACCORDING TO INC. MAGAZINE, 01/02/05.)


Tungsten is classified as a critical material according to the Defense National Stockpile Center. The article claims that "America's government has a stockpile that could meet all that country's demand for the next three years." I think it is a bit worrying that China is controlling 85% of the total production in the world, and is consuming about 35% of it. The good thing that has come out of this scary situation is that the North American Tungsten Corporation Ltd. "has emerged from bankruptcy protection and hopes to restart the idled site in July." It could be good if the Western companies could stabilize the situation and look out for China's aggressive strategy of bulking up on raw materials. For more on this topic, read Mary Lynn Young's article, China's power lights up international tungsten market.

The reversal of fortune at North America Tungsten, a small British Columbia mining company, over the past three decades mimics the dramatic highs and lows of a professional wrestling match. But the company's experiences are harbingers in miniature of the future and the potential power of the Chinese economy. (TheGlobeAndMail.com, 03/31/05.)


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