Orient: The tungsten industry anticipates a peak season for inventory buildup, with the sector having a foundation for rebound.

Orients research report states that, from a mid-term perspective, the rigid characteristics of global tungsten supply are difficult to reverse quickly. The trend of countries actively stockpiling and protecting strategic resources is on the rise, which may continue to compress the total available tungsten resources in global circulation, further reinforcing supply constraints in the tungsten market and amplifying price elasticity. The anxiety over critical minerals and the expectation of prolonged geopolitical conflicts are heating up, creating space for excessive tungsten stockpiling globally. The bank believes that the resonance of three factors: supply rigidity, the long-term drive for excessive stockpiling spurred by geopolitical games, and the approaching peak season provides a foundation for tungsten prices to rebound during peak season. Orient's main points are as follows: Supply: Policy games create supply rigidity, and it will still take time for large overseas projects to materialize. Domestically, the Ministry of Natural Resources has issued the second batch of tungsten mine quotas for 2026; among them, Heilongjiang Province has received a second batch of 200 tons, allocated to the Yangbai Mountain Iron Mine (the first batch was 100 tons), with limited new incremental increases. The bank expects that the annual mining quotas nationwide will maintain a slight year-on-year increase throughout 2026. At the same time, the intensity of environmental protection and safety supervision continues to increase, leading to the exit of production capacity from small and medium-sized mines, and effectively curbing illegal mining. Under the triple constraints of strict enforcement against illegal activities, compliant mines nearing full production, and continuous decline in resource endowment, long-term production may struggle to achieve rapid growth. On the overseas front, South Korea's Sangdong mine (the largest non-China project globally) has commenced production in early 2026 for Phase 1 (with an annual capacity of 2,300 tons of tungsten concentrate), while Phase 2 (planned to increase to an annual capacity of 4,600 tons) is expected to be operational in 2027. Additionally, the U.S. government has invested nearly $1.6 billion in Kazakhstan's Cove Kaz super tungsten mine project through EXIM/DFC, with the annual output expected to reach 12,000 tons after full production (approximately 15% of current global annual tungsten production). The project is scheduled to complete engineering studies, mine and processing plant construction planning, and commence site work before the end of 2027, but it remains challenging to establish an effective supply scale by 2030. In the mid-term, the rigid characteristics of global tungsten supply are unlikely to reverse quickly. On the policy front, Chinas "Mineral Resource Law Implementation Regulations," which will be officially implemented in June 2026, lists tungsten among the national strategic mineral resources, coupled with specialized regulatory policies set forth by the National Mine Safety Supervision Administration, further raising the compliance costs of domestic mining. In terms of export controls, starting in February 2025, China will implement a licensing system for the export of tungsten and related items, which will later be upgraded to a quota review and joint approval system; during the period from February to June 2026, a total of 80 Japanese entities were placed on control and watch lists, resulting in a substantive interruption of tungsten exports to Japan, continuously compressing available overseas supply. Looking ahead, the United States plans to ban the export of tungsten scrap starting August 27, which, if strictly enforced, may affect the global recycled tungsten supply chain. It is evident that nations are increasingly engaged in the strategic hoarding and protection of critical resources, which may continue to compress the total available tungsten resources in global circulation, further reinforcing supply constraints in the tungsten market and amplifying price elasticity. Demand: The AI computing cycle continues to drive demand in hard alloy/precision processing and semiconductor industry chains, while prolonged geopolitical conflicts are expected to create excessive stockpiling in the military sector, forming a dual-driven dynamic. In the AI semiconductor sector, as major global cloud providers ramp up capital expenditures in 2026, the expansion of AI servers and data centers corresponds with a growing demand for high-end cutting tools, PCB micro-drills, and tungsten-based materials like tungsten hexafluoride (WF6). In the military sector, according to Zhongshang CCM, driven by geopolitical circumstances, global military tungsten consumption is expected to reach 3,000 tons in 2025, a year-on-year increase of 36%; orders for armor-piercing cores and aircraft engine components are scheduled through 2027; the long-term nature of geopolitical conflicts like those in Russia-Ukraine and Israel-Iran is accelerating stockpiling in defense sectors in Europe and the U.S.: according to Project Blue, the proportion of tungsten demand for defense is set to rise from the current approximately 12% to about 15% in 2027-28. The "anxiety over critical minerals" and the expectation of prolonged geopolitical conflicts are opening up space for global excessive stockpiling of tungsten. Mid-term assessment and long-term outlook: Price increases for overseas tools have emerged, and the peak season may catalyze a rebound. Currently, the price of domestic tungsten concentrate has stabilized gradually after falling over 60% from the March peak of one million yuan, with leading companies slightly raising their long-term procurement prices month-on-month. Looking to the second half of the year, as the manufacturing peak season in September and October approaches, demand for hard alloys and cutting tools is expected to recover, and with overseas tool manufacturers starting to increase prices again, the cost-effectiveness of high-end tools in China is rapidly improving, which may release downstream demand during the peak season and catalyze a rebound. Risk warning: Risks of marginal policy shifts towards easing and risks of downstream demand being below expectations.