The China Securities Journal learned from China International Capital Corporation Limited that the Ministry of Natural Resources has recently issued the total mining control indicators for tungsten mining in 2024, with a total annual indicator of 0.114 million tons, a year-on-year increase of +2.7%, of which the second batch of indicators is 0.052 million tons, a month-on-month increase of +8.3% and a year-on-year decrease of -16.1%. In the short term, tungsten concentrate inventory has fallen to a historically low level, coupled with the imminent rate cut by the Federal Reserve and the gradual implementation of domestic growth stabilization policies, tungsten prices are expected to continue to stabilize and rise. According to Asia Metal, in terms of prices, the price of tungsten concentrate rose and fell from a high of 1.29 million yuan/ton in July to 1.4 million yuan/ton on August 27, an increase of +9% from the low point in July and a 15% increase from the beginning of the year. In terms of inventory, in July, the inventory turnover days of Chinese tungsten concentrate manufacturers were 2 days, a year-on-year decrease of -78%, and at a historically low level.

The growth rate of the total mining control indicators for tungsten mining in 2024 has slightly increased compared to last year, and the policy overall remains tight. In the short term, first, the total annual indicator for 2024 is 0.114 million tons, a year-on-year increase of +2.7%, a +0.9ppt increase in growth rate compared to last year, and the second batch of indicators is 0.052 million tons, a month-on-month increase of +8.3% and a year-on-year decrease of -16.1%, which is in line with expectations. Second, this notice continues the policy of last year, which is conducive to the centralized improvement of tungsten mining. The notice states that for primary mining of other ore types and large and medium-sized tungsten ore mines, biased allocation will be given based on the identified reserves; and by the end of December 2025, except for transfer of exploration rights to mining rights, and deep and upper level agreements for mining rights, registration for tungsten mining rights will be suspended.

In the long term, the growth rate of tungsten mining indicators is slowing overall. In December 2018, the Ministry of Natural Resources issued a notice strengthening the application conditions and environmental protection requirements for tungsten mining rights, and the growth rate of mining indicators fell from +10% in 2018 to +5.0%/stagnation/+2.9%/+0.9%/+1.8%/+2.7% from 2019 to 2024, with a CAGR of only +2.2% from 2018 to 2024.

The rate of excessive mining of tungsten concentrate has been decreasing since 2020, and the effectiveness of indicator management has significantly improved. From an annual trend perspective, since 2020, the rate of excessive mining of tungsten concentrate in China (the proportion of actual production exceeding the total indicator) has accelerated from 32% to 11% in 2023, and the growth rate of tungsten ore production and tungsten price trends have become negatively correlated, indicating the effectiveness of policy constraints. From a semi-annual perspective, according to the National Bureau of Statistics, the national tungsten concentrate production in the first half of 2024 was about 0.056 million tons, a cumulative year-on-year decrease of -1.72%, lower than the first batch of indicators for 2024 at 0.062 million tons, achieving the policy target.

In the medium to long term, the global increase in tungsten supply is limited, while the demand for photovoltaic tungsten wire is strong. The supply and demand for tungsten may remain in a long-term state of scarcity, which is beneficial to an upward shift in tungsten prices. On the supply side, China is facing constraints due to declining ore grades, environmental inspections, and tight mining indicators. CICC believes that overseas tungsten mines such as Hemerdon and Sisson are affected by environmental permits and financing delays, leading to delayed production, resulting in limited short-term increment in overseas supply. On the demand side, benefiting from the increase in photovoltaic tungsten wire, the global consumption of raw tungsten is expected to achieve a CAGR of +3.5% from 2023 to 2027, and the global supply-demand gap for raw tungsten in 2024-2027 is expected to be -1.2/-0.013/-0.014/-0.014 million tons, accounting for -12.8%/-13.4%/-13.8%/-13.4% of the demand, maintaining a state of scarcity.

In terms of investment targets, it is recommended to pay attention to leading companies such as Xiamen Tungsten Co., Ltd. (600549.SH) and China Tungsten High-Tech Materials Co., Ltd. (000657.SZ) that have large tungsten concentrate production capacity or potential for resource development, as well as high-end downstream production capacity.

Risk factors: significant price fluctuations in tungsten concentrate; project production by the company falls short of expectations; downstream demand falls short of expectations.