The Tungsten Market Is Warning of an Upcoming War

Episode Summary

Executive Summary: The episode examines tungsten as a strategically important but often overlooked mineral whose demand surges during war and geopolitical stress. Bloomberg’s David Fickling explains how military needs, AI/data-center growth, and China’s dominance of supply are reviving interest in reopening an Australian tungsten mine, despite tungsten’s difficult economics and lack of a futures market.

Main Topics: Tungsten as a war-linked strategic commodity (Priority: 5/5): The hosts and guest frame tungsten as a mineral whose importance rises sharply in wartime because of its density, heat resistance, and usefulness in munitions and armor-piercing applications. Historical boom-bust cycles in tungsten mining (Priority: 5/5): The Dolphin Mine in Tasmania is used as a case study showing how tungsten mines open during war, close after conflicts end, and can remain idle for decades until geopolitical tensions revive demand. Industrial and technological uses beyond defense (Priority: 4/5): Tungsten’s largest use is in tungsten carbide tooling, but it also appears in turbines, refinery catalysts, and possibly tiny amounts in AI chips, broadening its strategic relevance. China’s dominance and market fragility (Priority: 5/5): China’s control of most tungsten supply makes the market vulnerable to export controls, price spikes, and supply shocks that discourage Western investment in new mines. Project financing challenges without a futures market (Priority: 4/5): Unlike copper or oil, tungsten lacks a deep hedging market, making mine financing difficult because lenders cannot reliably price future output or revenues. Policy responses and strategic stockpiling (Priority: 4/5): The discussion considers whether governments should use floor prices, reserves, or other policy tools to support non-Chinese supply, while warning against broadening the definition of “critical minerals” too far. Substitution, recycling, and adaptation (Priority: 3/5): The hosts note that markets can adapt through recycling, substitution, and scrap sourcing, though this may not be enough in a severe supply cutoff.

Key Arguments: Tungsten becomes strategically important in periods of war because its density and melting point make it ideal for armor-piercing rounds, shrapnel, and other military hardware. Its largest civilian use is tungsten carbide tooling, which makes drill bits and industrial cutting tools more durable and effective. China’s geological advantages and long-standing dominance, rather than only deliberate industrial policy, explain much of its tungsten market power. The lack of a futures market or reliable forward curve makes tungsten mining hard to finance, because investors and banks cannot hedge price risk. A relatively small amount of capital can secure meaningful supply share in a tiny market, but private investors still hesitate because prices can collapse when geopolitical fear eases. Governments may need to backstop strategic minerals with temporary floor prices or targeted support to build non-Chinese supply chains. The current return of trench warfare, drones, and missile conflict in Ukraine and possible future Taiwan conflict make tungsten newly relevant again. Markets can partially adjust through recycling and substitution, but those mechanisms may not fully replace primary supply in a severe cutoff.

Data Points: World tungsten market size: About 85,000 metric tons per year - Guest’s estimate of total annual tungsten usage worldwide China share of global supply: About 80% - China dominates tungsten production and exports Remaining global supply outside China: About 20% - Used to illustrate how little non-Chinese supply is available North Korea and Russia share: Another 50% of the non-China supply share - Guest notes these countries are major producers within the remaining supply base Tasmanian mine potential market share: About 2.5% of the global market - Estimated output if the Dolphin Mine restarts successfully Tasmanian mine share of free-world market: Roughly one-sixth of the free world market - Guest contextualizes the mine’s strategic significance Equity invested in mine: About A$7 million - Current equity base of the restart project Total cash invested over 20 years: About A$77 million - Cumulative capital spent on attempts to restart operations Tungsten price example in 2022: Around $300 per dry metric ton unit - Host describes a prior warehouse price benchmark Tungsten price example currently: Over $3,000 per dry metric ton unit - Shows sharp price rise amid supply fears Dry metric ton unit conversion: About 7.93 kilograms of tungsten per DMTU - Explains how tungsten pricing is quoted Implied tungsten price per ton: About $400,000 per ton - Calculated from the DMTU quote at $3,000 Tungsten carbide share of use: About 80% - Most tungsten is used in tungsten carbide tooling Tungsten in turbine alloys: Up to 10% - Guest notes tungsten can make up a significant share of certain turbine-blade alloys AI chip usage: Tiny quantities - Mentioned as a possible but very small use in chip manufacturing Single FAD missile cost: About $10 million - Used to compare the small size of critical-mineral spending versus defense spending White House ballroom reference: About $800 million to $1 billion - Used as a scale example for how little it would cost to address some mineral-supply bottlenecks

Pivotal Quotes: "Tungsten, you can look at it as a bit like a sort of century-old missing prediction market for war, basically." — David Fickling: Explaining how tungsten investment tracks expectations of conflict "It is just very useful for military purposes. And, of course, if war is pending, people will pay any price." — David Fickling: Describing why tungsten demand spikes when geopolitical risk rises "What you actually want is a fairly small group of minerals where there is a real strategic issue. And I think tungsten's one." — David Fickling: Arguing for targeted policy support for truly critical minerals

Implications: Tungsten may become a bigger policy and investment focus as wars, drones, and AI infrastructure raise demand. Governments and investors may need to support supply diversification now, before a shock exposes dependence on China.