A Tungsten Hedge for a Split Market

The West has spent two years buying tungsten supply the hard way, with stockpiles, defence funding and government equity. On Oct. 19, 2026, it started building the easy part: a futures contract. CME Group said it will launch tungsten futures, with trading to start by early Q1 2027, pending regulatory reviews. The contract is a sensible piece of market infrastructure. It is also aimed at the wrong side of a broken market.

From vaults to venues

The earlier toolkit was physical. Fastmarkets reports that Washington is pursuing Pentagon stockpiling, Defense Production Act funding and partnerships with producers in South Korea, Portugal and Australia. The Financial Times, relayed by KuCoin, reports that the US and UK governments have taken equity stakes in tungsten groups through financing packages. Britain's deal at Hemerdon, which stopped production in 2018, gives it the rights to procure 50% of the mine's annual output, Industrial Info Resources reported.

The need is plain. Reuters reported that the United States has no active commercial tungsten mines, and the few projects under development have no established production timeline.

CME's move signals that policymakers now want prices as well as pounds. Jin Hennig, CME's global head of metals, said clients want to hedge their exposure and improve price transparency. Grondmet's Maarten Gassmann said tungsten is essential to production but has been hard to budget for without a forward market. TechMet SCM chief executive Quentin Lamarche put the policy case most directly: "having transparent forward pricing will support reliable, long-term western supply chains."

CME also has a commercial motive. Its metals business set a record in the first nine months of 2026, with 1.2 million contracts traded daily, up 41% year on year, according to its release. The company says the tungsten market is worth over $20 billion at spot prices, on annual output between 85,000 and 95,000 metric tons. That is a large pool with no hedging venue.

Two markets, one contract

The trouble is what the contract settles against. It will be financially settled on the Fastmarkets assessment for ammonium paratungstate (APT), duty unpaid, CIF Rotterdam and Baltimore. That is a Western price, and the Western price has parted company with China's.

China produces about 79% of global tungsten and controls about 85% of APT refining capacity, Rare Earth Exchanges reported in September. Beijing's export gate is narrow. Reuters reported that China said in December 2025 that only 15 firms would be allowed to export tungsten in 2026–2027. Discovery Alert reported that exports fell nearly 40% year on year after the February 2025 controls.

Prices show the split. Rare Earth Exchanges put European APT at $2,900–$3,100 per mtu, against a normalized Chinese domestic price near $1,000, and called them two increasingly separated markets. Reuters reported in April that Rotterdam APT was above $3,000 per metric ton, up more than 200% since the start of the year. China's own pricing runs on a different clock. Shanghai Metals Market reported that APT was negotiated mainly at 410,000–430,000 yuan per tonne in early trading today, after major tungsten enterprises began procurement last Friday.

A Rotterdam contract gives Western buyers a thermometer. It does not change the temperature of the room.

What the hedge leaves open

The contract's design adds limits. Discovery Alert noted that it hedges an APT price only, so exposure to concentrate, powder, carbide, freight and regional basis stays unhedged. Settlement rests on a single Fastmarkets assessment, which went through a 2026 methodology consultation under IOSCO principles. A tungsten user in Baltimore who buys heavy alloy powder from a non-Chinese supplier would still carry most of the risk that keeps her up at night.

The physical constraint is also slow to move. Rare Earth Exchanges warned that ex-China APT conversion capacity may outpace secure concentrate supply by 2030, which would shift strategic value upstream, to the mines the hedge does not touch. Almonty began mining at its South Korean mine in March, Reuters reported via MINING.COM, with a Phase 2 expansion planned for 2027. Even so, a second tungsten producer told Fastmarkets: "You're looking at a three- to five-year gap before new supply can really come online."

The best case against

The main objection is that every commodity market starts thin and grows. Discovery Alert's own evidence cuts both ways. CME's cobalt contract, launched December 2020, traded more than 40,000 lots in January–November 2025 with open interest just under 16,000 lots, which the outlet cited as proof that liquidity builds slowly. CME lithium hydroxide traded 91,000 tonnes in 2024, over four times 2023's 20,000 tonnes. A contract that starts quiet can still become the reference price.

There is a timing argument too. The Financial Times, via KuCoin, reports that the tungsten market is opaque, with most deals done bilaterally or through traders. It also reports that the market has cooled after a strong rally as buyers resist elevated prices. Fastmarkets' Andrew Wells said prices remain well above historical norms but resistance is growing. Discovery Alert reported that delivered APT in China sat at 540,000–560,000 yuan per tonne on 30 September before correcting this month amid destocking. A cooling market is a good moment to introduce a hedge.

All of that is true, and none of it answers the main problem. Liquidity is a question of when. The split is a question of what. A contract can attract volume and still settle against the price of only one of the two markets. Fastmarkets chief executive Raju Daswani, quoted in CME's release as carried by Stocktitan, pointed to the real need: "Growing volatility and concentrated supply are increasing the need for transparent, trusted price benchmarks in the tungsten market." Transparency helps, but only for the side of the market the benchmark can see.

What follows

If the thesis holds, the contract's first test comes from policy rather than trading volume. A US defence-procurement ban on Chinese-sourced tungsten powder and heavy alloys starts on 1 January 2027, and Project Blue estimates defence at around 12% of tungsten demand, rising to roughly 15% between 2027 and 2028. Those buyers will be paying the Western price by law, and they will want a hedge that tracks it. They will get one for APT, and the rest of their bill will stay exposed until a mine outside China is running.