The Chinese tungsten market remains stable as participants are waiting to see how the government will handle the ammonium paratungstate (APT) stocks held by the bankrupt Fanya metal exchange.
A decision on 26 July by China's Yunnan superior court has triggered concerns about a fall in tungsten prices, which are already under downwards pressure from flat demand from the downstream cemented carbide sector.
The Yunnan superior court upheld an earlier verdict by its subordinate Kunming court, which in March handed out fines of 1bn yuan ($150mn) to the exchange and Yn500mn, Yn50mn and Yn5mn to four related companies for illegal fund raising and embezzlement. The former president of the exchange, Shan Jiuliang, was sentenced to 18 years in prison. The court dismissed appeals from all the defendants, including Shan.
Prior to the retrial the Kunming court held two auctions on Fanya's indium stocks, which caused prices to fall in the spot market. The auctions have also led to downbeat sentiment in the tungsten market, prompting many suppliers that have tight finances to offload material on fears of a sudden release of the Fanya stocks to the spot market.
APT prices started to fall sharply in April on limited demand from key consumers. Prices for 88.5pc grade material dropped by around Yn4,000/t to Yn110,000-113,000/t from Yn150,000-152,000/t in the three months since the start of April. The rapid price falls prompted several APT producers to stop production to avoid losses. This also encouraged investors to build up APT stocks in early July.
Prices started to stabilise at Yn110,000-113,000/t on 5 July and rebounded slightly to Yn111,000-113,000/t on 16 July, with key producers keeping offers firm and reducing or halting production to prevent prices from falling further.
The 26,951t APT stocks held by the Fanya metal exchange is sometimes referred to as a "threat" to the market as the stocks account for 20-30pc of China's annual production. the country produced around 109,000t of APT in 2017 and 126,000t in 2018.
Most market participants are watching for more developments, such as possibility of the stocks to be bought by the government for a national stockpile or by the main producers. This means that the stocks are not expected to flood into the market at one time in the short term.
