The Tungsten Market Is Warning of an Upcoming War

PodcastOdd LotsDavid FicklingAug 3

The discussion centers on how China’s dominance of tungsten (≈80%) and other critical materials creates persistent geopolitical supply risk and policy dilemmas. Speakers favor targeted 3–5 year price guarantees for a short list of strategic minerals over broad reserve programs, warning that indiscriminate industrial policy can create boom‑and‑bust cycles. Markets are opaque — no futures market, wide quoted price ranges, and high holding costs — yet small, low‑cost projects like Dolphin (≈$77m invested) can still shift non‑Chinese supply by a few percent. Substitution, recycling and new discoveries mitigate but do not eliminate the concentration and wartime demand risks that drive episodic price spikes.

Base Metals Commodities Supply Chains

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Key Takeaways

China’s dominance—about 80% of global tungsten production (and ~65–70% of citric acid)—creates persistent geopolitical supply risk because Beijing can accept lower commercial returns to sustain capacity, prompting policymakers and investors to prioritize supply‑security measures.

Policymakers face a tradeoff between narrowly targeted 3–5 year price guarantees for a short list of strategic minerals (tungsten, rare earths, gallium, germanium) and broad reserve programs; the speakers argue focused medium‑term supports avoid subsidizing common commodities and limit harmful market distortion exemplified by China’s pork overexpansion.

Because military demand for tungsten can spike in conflicts—driven by its very high density and >3,000°C melting point used for armor‑piercing munitions—tungsten markets historically cycle with geopolitical tensions, causing mines to open, close and reopen based on perceived wartime needs rather than steady commercial demand.

Tungsten’s market structure—no futures market, opaque unit quoting (dmtu ≈ 7.93 kg), and wide quoted price ranges (~$300–$3,000/dmtu)—combined with state actions (export controls, stockpile sales) and high value density makes hedging, bank financing and inventory management difficult and amplifies boom‑bust risk for miners.

GEO-POLITICS

China Concentration — China dominates production for several strategic materials — the episode cites ~80% of global tungsten and ~65–70% of citric acid. China is willing to accept lower long‑term commercial returns to sustain capacity, creating persistent geopolitical supply risk that worries policymakers and investors.

“Evidently, China controls 65 to 70% of the world's citric acid supply, and citric acid has certain niche applications.”—

Policy Tradeoffs — Governments are debating supply security measures ranging from targeted medium‑term price supports to broad reserve programs like 'Project Vault'. The speakers argue medium‑term (3–5 year) price guarantees for a small list (tungsten, rare earths, gallium, germanium) are more effective, while unfocused large programs risk subsidizing common commodities and distorting markets.

“Ultimately, you need to have some sort of a floor price…”—

ECONOMY

Onshoring Costs — Simultaneous onshoring by many countries raises aggregate spending and can be inflationary, while duplicating capacity risks redundant supply and expectations of eventual oversupply unless a buyer of last resort exists. The macroeconomic cost of decentralizing strategic supply should be weighed against the security benefits.

“Which also begs the question if 1 of the big themes of our current period in time, as we've discussed on the podcast repeatedly now, is that everyone seems to…”—

MARKETS

Military Demand — Tungsten's extreme density and melting point (density similar to gold; melting point >3,000°C) make it uniquely useful for armor‑piercing projectiles and dense munitions pellets. These physical properties, not just industrial uses, can drive sudden wartime demand surges.

“It's about the same density as gold. But it also has this ridiculously high melting point of more than 3,000 degrees Celsius.”—

War Cycles — Tungsten has historically cycled with geopolitical tensions and wars — mines open, close, and reopen in response to perceived wartime needs. The market behaves like a long‑running, missing prediction market for conflict.

“Tungsten, it turns out, has gone through these cycles where for a few years, it's an absolutely essential strategic asset that you need in order to declare war.”—

Demand Composition — Roughly 80% of current tungsten demand is for tungsten carbide tooling (drill bits and industrial tools). Other uses (turbine alloys, small catalyst roles) are much smaller, and mentions of tungsten in AI chips are quantitatively negligible.

“Most tungsten now, 80% of it is just tungsten carbide. It's tools. And you can buy it in your local tool shop…”—

Tungsten's Boom‑Bust History

Hosts introduce tungsten and its recurring strategic importance, describing historical boom‑and‑bust cycles tied to wartime demand and novelty interest.

Why Tungsten Matters

Discusses tungsten's physical properties and military uses—high density and melting point make it ideal for armor‑piercing projectiles and shrapnel.

Nonmilitary Uses

Explains industrial roles for tungsten—tungsten carbide tooling, turbine alloys, and niche high‑temperature or catalytic applications.

Market Size And Pricing

Covers tungsten market structure: small annual demand, heavy recycling, no futures market, and wildly variable quoted prices that complicate financing.

Small Projects, Big Impact

Notes that modest investments (tens of millions) can shift non‑Chinese supply shares by a few percent, making small mines strategically meaningful.

China's Dominance Risks

Examines how China's geological advantage and willingness to tolerate low returns concentrates supply and can be used via export controls to influence markets.

Policy Options And Pitfalls

Argues for targeted 3–5 year price guarantees for a short list of strategic minerals rather than broad, indiscriminate reserve programs that create boom‑and‑bust cycles.

Supply Responses And Substitution

Covers market adaptations—recycling, substitution, and new discoveries reduce but do not eliminate concentration and wartime spike risks.

Closing Takeaways

Hosts summarize the paradox of small strategic investments versus large geopolitical risks and encourage attention to underappreciated materials like tungsten.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

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