Declining APT prices in recent weeks discourages reclamation of
concentrate material from tungsten carbide scrap by providing a
lower-priced feedstock material for tungsten products.tungsten rings for women in wedding
The US carbide scrap market is coming off a period of high scrap
generation and while demand is waning for carbide tools. A large
increase of carbide imports grew domestic inventories, while the
economic incentives to utilize these products are declining.
Average monthly export prices from China for APT in July reached the
lowest levels in over two years at $197-207/mtu. Prices fell 23pc from
the average monthly price of $255-265/mtu in January 2019.
US processor buying prices for tungsten carbide scrap inserts and rounds
dropped to $5.00-6.00/lb in August from $7.25-8.25/lb a month earlier.
The 29pc drop marks the lowest price for the carbide scrap rounds and
inserts since the end of January 2009.
Processors said that carbide scrap is not being recycled for APT at
similar volumes than in previous years owing to a lack of demand from
domestic and offshore consumers.Market participants could import
lower-priced APT as a feedstock to manufacture tungsten products without
the need to reclaim the material from carbide scrap for resale. Despite
pressure from cheap imported APT, consumers contend that carbide scrap
recyclers would not stop production to purchase APT in lieu of refining
scrap for the material.
The rise and fall of tungsten carbide scrap prices in the US in the last
decade is strongly correlated with fluctuations in APT export prices in
China. US processor margins get squeezed when the price of APT declines
and price spreads between the two sources of tungsten material tighten.
Additionally, as APT prices start to rise, so typically does the volume
of tungsten carbide imported into the US, and the opposite is generally
true when APT prices begin to drop.
Year-to-date US imports of tungsten carbide totaled 1,062 metric tonnes
(t) through June, 68pc higher than the prior 10-year average volume over
the same period and on pace to set a record high since the
International Trade Commission adopted the harmonized tariff system in
1989.
China's market share of US tungsten carbide imports have not deviated
significantly over the last 10 years, and the price per unit of quantity
is generally slightly below the average price for all tungsten carbide
imports.
In terms of exports, China imposed retaliatory tariffs on the US
including on exports of "scrap generated in machining" and "tungsten
waste." US exports of tungsten waste and scrap to China fell to zero in
July 2017, with none shipped since.
While US exports dropped off completely, China accounted for almost 48pc
of US tungsten carbide imports in the first half of 2019, the largest
share since 2013.
Typically carbide scrap shipped to China would be re-manufactured into
cutting tools for export to the US. After-market uses for
re-manufactured carbide tools from carbide scrap serve machining shops,
machinery manufacturers, and the oil and gas industry.
According to Federal Reserve data, oil and gas drilling and machine shop
production reached their highest levels since March 2015, after
recently peaking in November 2018 and March 2019, respectively.
Machinery manufacturing capacity utilization reached its' highest level
since September 2012 in the month of November 2018.
All three rates are declining from multi-year highs reached within the
last six to seven months, a trend which mirrored the decline of carbide
scrap prices in previous downturns in 2009 and 2016. The significant
difference between 2009 and 2016 is the global economic recession of
2008 and the recession in the oil and gas industry in late 2015
precluded and exacerbated the drops in prices owing to macroeconomic
factors.
Upward swings in these metrics typically indicate an increase of scrap
generation as well as an increased demand for carbide tools, whether
manufactured from imported tungsten carbide or refurbished carbide
scrap. An oversupply of inventory typically follows when these rates
start to descend. For instance, carbide scrap prices declined for 17 of
the following 18 months starting September 2014 as all three rates
declined precipitously from multi-year highs from the end of 2014 to
when the price bottomed out January 2016.
