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Global epidemic eases Can the market improve in May?

At the end of April, a slight rebound in tungsten prices meant that there was room for profit. If the market continues to improve, this rare limited profit space can still be operated. This is also one of the uncertainties in the market in May.

    In addition, it is impossible for the tungsten mine to remain in a state of reluctance to sell for a long time. Because reluctance to sell may mean a shortage of funding sources and an increase in inventory.

    It is understood that due to the current increase in demand for construction sand, some waste rock produced during mining can be used as construction materials, which undoubtedly reduces the production cost of the mine. For the mine, it is definitely good news, but not all Mines are able to reduce costs. Compared with the overall average mining cost, this part of the profit may not be significant.

    That is to say, if the mine price maintains the status quo or continues to go down slightly, then the cost-supported period will continue to sing. At present, the huge contradiction between the stable output of tungsten sand and the greatly reduced demand has not been resolved. In this way, without reducing production or stopping production, the market price can only rely on the support of mining costs and reluctant sales.

    From the perspective of market supply and demand, the solution to the contradiction is very simple. It is nothing more than reducing output, or expanding demand, or a combination of both.

    Moreover, it is not easy to reduce or stop production, just as it is difficult to reach an agreement to reduce oil production. In recent years, it has been difficult to unify production cuts and shutdowns in mines. Due to the large difference in domestic tungsten mining costs, production cuts and cessation of production will inevitably not meet the interests of some manufacturers. The game between various producers makes it difficult to match the reduction in output with the reduction in demand. In addition, generally speaking, ensuring the full utilization of production capacity will reduce the average production cost. Some mines can only produce at full capacity in order to reduce costs, which forms a contradiction that is difficult to reconcile.

    Suspension of production is more difficult. Whether it is a state-owned or private mine, the most unwilling result is the suspension of production, because production stop does not mean that the expenditure is stopped, the manufacturer still has to maintain equipment, pay workers ¡¯wages, pump mines, etc. Some necessary expenses are very large, and the mine will balance the shutdown and production which is more conducive to survival. Therefore, the market in May may be even more difficult for mines.

    The output of APT in April has decreased compared with March. This is expected. The output of APT in May is still restricted by the supply and demand of tungsten sand. It will become the norm for smelters to reduce or stop production. The supply of tungsten powder is completely dependent on the number of orders. Because of the reduction in demand, the production capacity is further surplus. So as long as there are orders, some powder factories would prefer to make small profits or even lose slightly. After all, in this market, survival is the key.

    Judging from the demand for tungsten, we will still quote the forecast made for the April market at that time. The export market remains the focus of attention in the coming months. The trend of the export market depends largely on the control of the epidemic situation abroad (mainly in Europe, America, Japan, South Korea and other countries and regions). Judging from the current situation, the most direct impact of the epidemic is on the production and trade circulation of the factory, and these two aspects will soon recover as soon as the epidemic is alleviated.

    Although our macro analysis mentioned that the United States, Europe, Japan and other countries are carrying out economic stimulus policies by flooding, but if the epidemic is not effectively controlled, the support provided by these measures will be weak. The author believes that this epidemic The deeper impact is the most critical, first is the consumption capacity, second is the consumer confidence, and then the trade circulation.

    Effective fiscal policies can improve people ¡¯s spending power, but it takes time to rebuild consumer confidence. Moreover, after the outbreak of this epidemic, it can be seen that globalization has been more seriously questioned, and divisions have deepened. The increasing degree of regional unbelief, coupled with the varying degree of control of the epidemic in various countries, is bound to hinder trade circulation, and the reduction in transactions means that development is lagging, so, overall, the future global market is very uncertain.

    In short, the situation on the demand side is more complicated. In the uncertain market in the future, we can be sure that the weak demand will continue in a short period of time. The future tungsten market will still likely rely on cost support.

    To sum up, since the reduction in demand is a foregone conclusion, the contradiction between oversupply and supply in May is difficult to resolve. Unless the mine-powder plant is shut down to reduce production, it will be difficult for prices to rebound on a large scale, and the weak market will probably continue, and the decline may also occur However, the possibility of continuing a rapid and sharp decline is unlikely. What manufacturers can do at present is to stay on the sidelines, wait for orders, and exercise limited operating space with caution.

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