China Merchants Securities released a research report stating that since 2025, tungsten concentrate prices have been on a sustained upward trend. Small and medium-sized enterprises are facing cost pressures and even production cuts or shutdowns, while Japanese and Korean companies generally lack a secure supply of tungsten resources. In contrast, leading domestic enterprises have achieved performance growth by leveraging advantages such as price adjustments and inventory. Subsequently, demand may increasingly shift towards domestic leading companies that still possess strong order-taking and supply capabilities.
The cutting tool industry has historically been fragmented with intense price competition. Under the influence of rising tungsten prices, it is now facing a historic opportunity for industry restructuring, and is recommended for focused attention. The main views of China Merchants Securities are as follows:
Cutting tools are consumables in machining. With the development of the manufacturing industry, demand is experiencing steady growth. Data from QY Research shows that global sales in the cutting tool market reached $28.65 billion in 2024, with the market size projected to be $33.85 billion by 2027. According to data compiled by Guanyan Tianxia, the market size of China's cutting tool industry grew from 39.3 billion yuan in 2019 to 53.8 billion yuan in 2023.
Tungsten prices continue to rise, creating a profit margin advantage through early stockpiling and subsequent price adjustments. Tungsten is a core raw material for CNC tools. Since 2025, the sustained increase in tungsten concentrate prices has had a clearly differentiated impact on tool companies. Leading enterprises have achieved performance growth through advantages like price adjustments and inventory, while small and medium-sized companies face cost pressures and even production cuts or shutdowns.
Leading enterprises possess stronger financial resources, having stockpiled raw material inventories in advance. There is a time lag in passing on the increased costs from rising tungsten prices. These low-cost inventories give companies a significant advantage on the cost side, and their profit margins are expected to further expand as product prices increase.
As tungsten prices continue to rise in this cycle, the market share of leading domestic tool companies is expected to increase, leading to changes in the industry landscape. On one hand, a large number of small and medium-sized domestic tool manufacturers, with their weak financial strength, struggle to maintain sufficient raw material reserves during a rapid price increase cycle. They also lack product pricing power, making it difficult to pass cost pressures downstream. The "low-price strategy" long relied upon by SMEs is becoming ineffective, and their market share is likely to be captured by domestic leading companies with ample raw material reserves, further consolidating and clearing the industry.
On the other hand, China controls over 80% of the global tungsten resource supply. Since 2025, China has strategically tightened the supply of tungsten ore through mining quota controls and export license management. Japanese and Korean companies generally lack a secure supply of tungsten resources and may even face supply disruptions. Domestic companies are expected to seize this opportunity to achieve import substitution.
Therefore, both small and medium-sized enterprises and Japanese/Korean companies face uncertainties in raw material supply. Demand is likely to concentrate and shift towards domestic leading enterprises that still maintain strong order-taking and supply capabilities.
Regarding specific investment targets, leading domestic companies such as华锐精密 (688059.SH), 欧科亿 (688308.SH), and 中钨高新 (000657.SZ) are expected to benefit from the current cycle of rising tungsten prices and are recommended for close attention.
Risk warnings include the risk of falling tungsten prices, deterioration in competitive landscape, risk of talent loss, and risk of manufacturing recovery falling short of expectations.
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