Group 1 - The core viewpoint of the report indicates that tungsten prices have entered a bull market phase, driven by tightening supply and demand dynamics, along with premium incentives from overseas downstream tungsten products [1] - In the long term, the company maintains the perspective that the tungsten supply-demand gap is expected to expand from 18,300 tons in 2024 to 19,100 tons in 2028 [1] - The projected global tungsten supply-demand gap as a percentage of original tungsten demand for the years 2024 to 2028 is estimated to be -18.4%, -16.6%, -17.0%, -16.8%, and -17.4% respectively, indicating a continuous upward trend in tungsten price levels [1]

Core Viewpoint - The continuous improvement in the operations of Zhongtung High-Tech (000657) is highlighted, driven by price adjustments in its cutting tool products and the rising prices of tungsten, which is beneficial for the company's future performance [1][5][6]. Group 1: Financial Performance - In 2024, the revenue from cutting tools, one of Zhongtung High-Tech's main products, is projected to be 3.189 billion yuan [2]. - The company has experienced a consistent increase in net profit attributable to shareholders over the past five years, with the latest figures showing a net profit of 939 million yuan for the first quarter of this year, marking a year-on-year growth of 3.24% [3][6]. - The company's net profit figures from 2020 to 2024 are as follows: 221 million yuan, 528 million yuan, 535 million yuan, 800 million yuan, and 939 million yuan, reflecting significant growth rates [6]. Group 2: Product Pricing and Market Strategy - Zhongtung High-Tech has adjusted the prices of some cutting tool products by 5-8%, affecting over 50% of its overall sales volume in this category [1][4]. - The price adjustments are influenced by various factors, including cost structure, market demand, and competition, aimed at balancing costs and market conditions [4]. - The company plans to adjust its pricing strategy based on the trends in tungsten raw material prices and changes in market supply and demand [4]. Group 3: Tungsten Market Dynamics - Recent data indicates that tungsten prices have surged to historical highs, with black tungsten concentrate prices reaching 165,500 yuan per ton, an increase of 18.2% from early April [5]. - The long-term price trends of tungsten are determined by supply and demand dynamics, with factors such as government quotas, environmental regulations, and declining resource quality impacting supply [5]. - The high tungsten prices are expected to support Zhongtung High-Tech's operational performance, as the company benefits from owning high-quality mining assets [5]. Group 4: Asset Acquisition and Expansion - Zhongtung High-Tech has been actively acquiring mining assets, including the acquisition of the largest single tungsten mine, which produces 7,800 tons of tungsten concentrate annually [3][7]. - The company completed a significant asset restructuring in 2024, acquiring 100% of the shares of Hunan Shizhu Garden Nonferrous Metals Co., Ltd. for 5.195 billion yuan, enhancing its resource reserves [7][9]. - In addition to the acquired assets, Zhongtung High-Tech is also managing four other mining operations under the Minmetals Group, indicating a strategy of expanding its resource base [9].

Investment Rating - The report maintains a "Recommended" rating for the tungsten industry, indicating a positive outlook for the sector [3]. Core Insights - The tungsten quota has been reduced, leading to a continuous increase in tungsten prices. The Ministry of Natural Resources has set the total mining quota for tungsten at 58,000 tons for 2025, a decrease of 4,000 tons or 6.45% compared to 2024. This reduction is particularly pronounced in traditional tungsten mining regions like Jiangxi, likely due to increased mining depth and declining ore grades. As a result, tungsten prices have remained high, with black tungsten concentrate prices reaching 154,000 yuan per ton, an increase of 8.45% since early April 2025, nearing historical highs [6][6][6]. - Export controls on tungsten have been upgraded, and the Bakuta tungsten mine has commenced production. On February 4, 2025, the Ministry of Commerce and the General Administration of Customs implemented export controls on various tungsten-related products to protect strategic resources. The Bakuta tungsten mine, which began production in November 2024, aims for a processing capacity of 3.3 million tons of tungsten ore, with an expected output of over 6,000 tons. However, short-term overseas production increases are unlikely to alleviate current supply tightness [6][6][6]. - Macro policies may drive PMI recovery, with consumption expected to rebound. Since March, many hard alloy companies have issued price increases, reflecting the pressure of rising raw material costs on downstream sectors, which has further fueled tungsten price momentum. The global military industry’s rapid expansion is significantly boosting tungsten demand, particularly in defense applications. The current industry situation is characterized by tight tungsten supply, low demand, and low inventory levels, suggesting that a demand recovery could lead to further price increases [6][6][6]. - Investment recommendations favor companies involved in self-produced tungsten mining, cutting tools, and the entire industry chain. Companies to watch include China Tungsten High-tech, Xiamen Tungsten, Zhangyuan Tungsten, Xianglu Tungsten, and Oke Yi [6][6][6].

Summary of Tungsten Industry Conference Call Industry Overview - The tungsten market is expected to remain tight in 2025, with no significant increase in supply and stable demand, leading to an optimistic outlook. The average price for the year may reach around 160,000 yuan, with a fluctuation range of 20%-30% [1][7] - In Q1 2025, tungsten exports significantly decreased due to policy adjustments, with a cumulative decline of 27% by March. However, imports increased by 20% year-on-year, with tungsten concentrate imports growing by over 40% [1][3] Key Points on Demand and Supply - The demand for tungsten is expected to increase significantly due to nuclear fusion test reactors, with an estimated demand of over 3,000 tons of metal, accounting for about 5% of total consumption. The acceleration of domestic and international experimental reactor construction and commercialization is driving this demand [1][6] - The first batch of tungsten quotas for 2025 has been reduced by 4,000 tons, marking the largest reduction in five years. The strengthening of the Mineral Resources Law may lead to more policies managing strategic metals, presenting development opportunities for tungsten [1][9] - The Bakuta tungsten mine in Kazakhstan is expected to release 2,500-3,000 tons of metal in 2025, but the growth in domestic demand in China may offset this increase, resulting in limited impact on global supply and demand [1][10] Production and Inventory Insights - In Q1 2025, the tungsten industry maintained stable operations, with tungsten concentrate production increasing by less than 1% year-on-year. The hard alloy segment saw a 9.9% increase, indicating a shift in the industry chain focus [2][4] - Current tungsten industry inventory levels are low, with deep processing product increases outpacing raw material growth. Prices are higher than the same period last year, and it is expected that inventory will not see significant increases this year [4][17] Price Trends and Influencing Factors - Tungsten prices increased by 15% year-on-year in Q1, primarily due to the ongoing tight supply-demand situation established in 2023 and 2024. Despite insufficient order saturation, production is still growing, albeit at a slow pace [5][27] - The price increase in 2024 was influenced by geopolitical factors such as conflicts in the Middle East and Ukraine, while the price increase in 2025 is expected to be driven by domestic demand and regulatory policies [8][9] Export and Import Dynamics - The export of tungsten is approximately 30,000 tons annually, with domestic consumption around 64,000 tons. Exports account for about one-third of total demand, while domestic consumption makes up two-thirds [23] - Hard alloy products, including tools, are not subject to export restrictions, while raw materials require licensing. In 2024, hard alloys accounted for 32% of total exports, with raw materials exceeding 50% [16][25] Future Outlook - The global tungsten production in 2025 is expected to remain flat compared to last year, with limited growth in domestic production offsetting the increase from the Bakuta mine. Demand growth in tungsten materials, chemicals, alloys, and hard alloys is anticipated [32] - There is uncertainty regarding strategic reserve actions for tungsten in 2025, with potential interventions in the market depending on price levels and military supply needs [30][31]