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Has the market stabilized?

Last week, the tungsten market ended steadily, falling for more than a month, and the prices of most tungsten products fell below the cost line. Therefore, starting from the tungsten mine, reluctance to sell sentiment appears, which gives the market a lot of support to a certain extent. Stable market prices will allow some of them just to enter the market, and part of the hot money will also enter the store to stock up, which makes the market for the past two weeks look more active than the end of March.

    However, the actual situation we must face is that the global epidemic is far from over. Its initial impact was on the start of factories and the circulation of people, and then spread to the entire consumer field. Therefore, whether it is the historical decline in oil prices, It was the shocking multiple blows of US stocks, or the continuing downturn in the non-ferrous metals industry, which were all affected by the epidemic, and the global market circulation was severely blocked. Based on the negative factors of various parties, can the market be completely stabilized? The simple analysis of this website is as follows;

    1. Macro aspect: Analysis of the impact of economic situation on the tungsten industry

    An epidemic has plunged the global economy into a quagmire, but whether this is a disaster that only erupts for 1-2 years or an economic crisis that lasts for 5-10 years is currently divided. Although European and American countries have adopted bailout policies in the short term, they have only boosted the financial market and have not helped the overall economy, so it is too early to talk about bailout effects.

    In addition, the world is still under the influence of the epidemic. Countries are still busy closing border isolation and controlling the epidemic to save themselves. It is impossible to conclude this impact in the short term.

    In order to facilitate everyone to make some analysis and judgment on the current situation, we have made a long and short analysis table on the recent domestic and foreign situations, as follows:

International situation

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Over 2 million diagnoses worldwide and over 140,000 deaths

New diagnosed inflection point in the US, new slowdown in Europe, mandatory home isolation to wear masks

The epidemic caused a shortage of medical resources

The per capita medical resources in Europe and America are relatively high, and China provides a lot of aid + exports

The epidemic in Europe and the United States will continue for 1-2 months, and the manufacturing industry will be shut down on a large scale

Europe and the United States promoted the gradual resumption of production in May, and the high-end manufacturing industry recovered faster

IMF predicts global economy shrinks by 3%

Short-term economic shock, if the epidemic is controllable, will rebound rapidly by 5.8% in 2021

Financial market turmoil

European and American stock markets entered the technical bear market the fastest and the technical bull market the fastest

Oil prices plummeted below $ 20 / barrel

OPEC + reached 9.7 million barrels per day production reduction plan, US shale oil continued to reduce production

The trend against globalization has intensified, and the United States and Japan say they will withdraw from China

Reshaping the global industrial chain, China's market environment has obvious advantages, and its attractiveness has increased

Unemployment in the U.S. exceeds 5 million for 4 consecutive weeks

The US 2 trillion stimulus plan caused an unemployment subsidy of US $ 15 / hour, which exceeded US $ 8 / hour for low-paying jobs. The lower and middle-level people took the initiative to lose their jobs.

Domestic situation

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China's epidemic faces import risks

Customs and airports are strictly controlled, sporadic distribution, no large-scale outbreaks

GDP growth in the first quarter of 2020 may be negative

UBS, Goldman Sachs, KPMG and other institutions predict GDP growth rate of 3-5% in 2020

China's manufacturing industry is hit hard, export orders shrink

Exports in March fell by 3.5% year-on-year, a sharp rebound from January to February. Increased export of medical supplies, continuous introduction of domestic stimulus policies, and significant increase in export-to-domestic sales

Large-scale failure of Chinese companies

99% of enterprises above designated size start work, small and micro enterprises can obtain relief funds to ensure employment

China has not announced a large-scale bailout policy, liquidity is tight

China's M2 growth rate in March exceeded 10%, and its balance exceeded 208 trillion. In the first quarter, loans increased by 7.1 trillion yuan. The Ministry of Finance announced that it will increase the deficit rate and issue special government bonds. Current liquidity is sufficient. Has controlled CPI "from 5 to 4".

China's investment pull effect weakens

The traditional infrastructure was gradually resumed, and the sales volume of excavators hit a historical record. New infrastructure in seven areas will be the focus of investment, with new charging piles increasing by 37%.

China's consumer market has fallen sharply

Although the segregation has caused a freeze in the clothing, food, housing and transportation industry, the e-commerce consumer demand has increased significantly, and some regions have lifted the ban.

    It can be seen from the above situation that the epidemic has achieved the ultimate effect of the first wave of major strikes on the global economy from March to April. Under the hasty counter-attack strategy, there has been a short-term rebound. Leaders of European and American countries must not Instead of resuming work, China has gradually recovered under the general environment with better epidemic control.

    But still need to be cautious, we still have insufficient understanding of this "invisible enemy", and it will take more than 6 months for the vaccine to reach the promotion stage. Before this, the long and short battles will still be stuck, since 2008 The economic ills accumulated since the outbreak of the financial crisis may still have the effect of the gray rhinoceros, and even the unpredictable black swan event.

    2. Microscopic aspect: the contradiction of oversupply increases

    The current situation on the supply side of the tungsten market is relatively clear. Most domestic mines continue to maintain production. However, the output of tungsten mines in April should not be affected by the sluggish demand, and the mines will not be easily suspended unless they have to do so. Some smelters have stopped production and reduced production, and smelters have begun to reluctant to sell because of pressure from upstream and downstream. APT output will decrease in April, but APT's inventory is sufficient.

    The operating rate of tungsten powder factories is getting lower and lower. The orders reduced by large-scale powder factories are mainly in terms of exports and domestic demand, but they are more optimistic than exports. Small and medium-sized powder factories will reduce pressure on double orders. At least for now, if there are still no orders to enter the market in late April, some powder factories will stop production in May. Looking at future demand from powder orders, overall demand weakness will continue.

    Based on a comprehensive analysis, we can only take a short-term cautious attitude towards the current tungsten industry market, and we recommend that companies still focus on returning cash to reduce purchases and reduce inventories. In the medium term, we still need to look at the European and American epidemic control and the recovery of China's consumer demand before making expansion plans. But in the long run, it is just right for large companies to control mineral resources at the front end, and downstream alloy companies can also increase research and development efforts to take the opportunity to replace some of the mid- to high-end markets of European and American products. Regardless of whether the US and Japanese manufacturing industries will withdraw from the Chinese market, the development of China's tungsten industry chain will still be centered on China under the resource advantage, and develop from "big but not strong" to "bigger and stronger".

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