BEIJING, Mar. 8 -- China's tungsten enterprises have called for the formation of an industrial alliance to bring an end to the current spate of skyrocketing tungsten prices.

    At a meeting in Beijing yesterday, the China Tungsten Industry Association urged enterprises to establish a scientific and feasible pricing system.

    Association Vice-Chairman Kong Zhaoqing pointed out that the current high prices of tungsten ore and related products are "against market economy rules," and will spell disaster for downstream manufacturing.

    Tungsten prices have kept growing rapidly since the beginning of 2003.

    For instance, the price of tungsten concentrates leapt from 24,000 yuan (US$2,899) per ton to 40,000 yuan (US$4,831) at the end of 2003. The current price is 58,000 yuan (US$7,001) per ton, according to the association.

    Tungsten demand has experienced rapid growth with the fast growth of the Chinese economy and the overall global economic recovery.

    Seeing this dramatic hike in demand, a large number of new tungsten metallurgy and processing enterprises sprang up.

    Those new plants, according to past experience, usually need to reserve a certain amount of tungsten before full-scale production is launched.

    This reserve demand for tungsten is as much as 15 per cent of the total, Kong said.

    Such a trend further increases tungsten demand.

    "Redundant construction of tungsten enterprises is one of the urgent issues to tackle," Kong pointed out.

    He was echoed by Gao Zairong, vice-general manager of Zhuzhou Cemented Carbide Group Co Ltd, one of China's leading tungsten processing companies.

    "It is ridiculous that some local officials said they aim to establish their own tungsten processing firms, in order that tungsten ore explored within the region will not go to other parts of the country," Gao said.

    He said such a waste of resources is against the central government's policy.

    Speculation is another major reason for the high price of tungsten products.

    Taking the opportunity of this increasingly large demand, some speculators maliciously drove up prices.

    Meanwhile, the supply of tungsten dropped somewhat due to the Chinese New Year holiday.

    "Prices are likely to drop in March," predicted Liu Tonggao, president of Xiamen Tungsten Co Ltd from East China's Fujian Province, one of the country's largest enterprises of its kind.

    "The situation that demand exceeds supply will change with those new metallurgy plants starting their production," Liu added.

    He suggested that a proper pricing system should be established in order to maintain the sustainable growth of the industry.

    Major enterprises should meet each other regularly, deciding quotations on tungsten products, leaving no opportunities to speculators, Liu said.

    Tungsten mines, metallurgy plants, processing enterprises and trade firms should be realistic about the current high prices, rather than blindly optimistic.

    Liu said: "Tungsten-related enterprises should cherish the existing achievement (the price of tungsten growing from nothing to the current high level), but we need to maintain it in the long run.

    "We are not aiming to cut the price, but rather we want the price to grow in a healthy way," Liu said.

    Enterprises at the meeting agreed to work with the government and the association to achieve a more orderly situation in tungsten mining, and fight redundant construction and speculation.

    Representatives from 20 major domestic tungsten enterprises took part in the meeting.

    These firms are responsible for more than 40 per cent of China's tungsten output.

    Government officials from the National Development and Reform Commission, the Ministry of Land and Resources and the Ministry of Commerce also attended the meeting.

    Tungsten, as a non-generated rare metal, is an essential raw material in various industries, such as aviation, automobiles and defence.

    China leads the world, in terms of the metal's production, consumption and export volume.

    Statistics from the association indicate, the output of tungsten ore hit 85,378 tons last year, up 25.9 per cent year-on-year.

(Source: China Daily)