OREANDA-NEWS. Tight supply of tungsten in China resulting from regular government environmental inspections will continue to support the market in the long term.

Tungsten prices have risen sharply in the past two months because of reduced inventories of tungsten concentrate and renewed demand from international consumers. Large producers have reduced output this year because of tighter profit margins as stricter government controls on pollution have lifted their operating costs. And many smaller mines with limited finances have halted production because they have less control over costs than large producers.

Official and commercial stockpiles are not expected to relieve the supply tightness. China's government purchased 20,000t of tungsten concentrate for stockpile in 2016 and the Jiangxi provincial government is holding 10,000t of inventory. There is no sign that the authorities plan to release the stocks to the spot market.

It remains unclear where the Fanya Metal Exchange's 29,000t of inventories are held because the authorities have not announced any judgement since the exchange's collapse in 2015.

Spot tungsten concentrate prices have risen to 118,000 yuan/t ($18,000/t), up by 59pc since the beginning of this year and the highest level since December 2013. This has lifted prices for intermediate products ammonium paratungstate (APT) and tungsten trioxide and downstream product tungsten carbide.

A rise in exports because of the reduced domestic supply has driven prices higher. Exports of tungsten trioxide and APT surged by 123.09pc and 101.75pc, respectively, in January-July, customs data show, with consumers in Japan, the US and Europe replenishing stocks to secure supply for the next six months.