The Tungsten Conundrum: Supply Chain Vulnerabilities and the Surge in Oil Drilling Costs

The tungsten market has become a flashpoint in the global race for critical minerals, with prices surging to record highs in 2025. This volatility is not merely a commodity story-it is a strategic crisis with profound implications for energy production, defense, and industrial innovation. For oil drillers, the rising cost of tungsten-a key component in drillbit manufacturing-has exacerbated inflationary pressures, while supply chain vulnerabilities underscore the risks of overreliance on a single supplier.

Supply Constraints: China's Dominance and Geopolitical Tensions

China's grip on the tungsten supply chain remains unshakable, accounting for over 80% of global production and refining capacity, according to the Tungsten market outlook. In 2025, Beijing tightened mining quotas, reducing output by 6.45% year-on-year, while enforcing stricter environmental regulations, according to a Quest Metals analysis. These measures, coupled with export restrictions, have created a perfect storm for global markets. For instance, ammonium paratungstate (APT) prices in Europe spiked to $430 per metric ton-degree, while U.S. prices for black tungsten concentrate hit $88,805 per metric ton in Q2 2025, according to IMARC price data.

The U.S., which imports 83% of its tungsten from China (per USGS data), faces a critical vulnerability, The Oregon Group warns in its analysis of supply-chain risks (The Oregon Group warns). This dependency has been weaponized, as Chinese export controls have directly inflated costs for oil drillers. Polycrystalline diamond compact (PDC) drillbits, which rely on tungsten for durability, now cost $3,000–$25,000 more than pre-2023 levels, according to a Reuters analysis.

Demand Dynamics: Military and Industrial Appetite

While supply constraints are a primary driver, demand-side pressures are equally significant. Military applications have surged, particularly in Europe, where tungsten is used in armor-piercing munitions and rocket components, according to the Core Consultants outlook. The Pentagon, meanwhile, is accelerating efforts to source tungsten from non-adversarial suppliers by 2027, signaling long-term demand resilience, according to a Carbon Credits analysis.

Industrial demand is equally robust. Aerospace and semiconductor manufacturing require tungsten for its high melting point and strength, with global consumption in these sectors rising by double digits annually. This dual demand-military and industrial-has created a floor for prices, even as recycling and secondary supply (which accounts for 37% of demand) attempt to offset shortages.

Oil Drilling: A Case Study in Cost Inflation

The oil industry's reliance on tungsten is both literal and economic. PDC drillbits, which constitute 75% of materials used in oilfield operations, have become a major cost driver. A Reuters analysis found the $3,000–$25,000 price increase per drillbit has forced oil companies to allocate more capital to equipment, squeezing margins in an already volatile energy market.

This inflationary pressure is compounded by the U.S. Department of Energy's push for domestic tungsten recycling initiatives, which, while laudable, cannot offset immediate supply gaps, as noted in Carbon Credits' reporting. For oil drillers, the result is a Catch-22: higher costs for critical equipment at a time when energy prices are fluctuating and geopolitical risks are rising.

Strategic Investments: Diversification and Innovation

The market's response to these challenges has been a scramble for supply chain diversification. Projects like Nevada's Pilot Mountain mine and Spain's Panasqueira mine are now critical to non-Chinese production. South Korea's Sangdong mine and Australia's Mt. Carbine project are also expected to contribute modestly by 2026, though their output will remain a fraction of China's dominance.

Investors are increasingly turning to junior mining firms and recycling technologies. The U.S. Department of Defense has already earmarked funds for tungsten reclaiming projects, while private equity is backing startups focused on urban mining-extracting tungsten from discarded electronics and industrial waste. These innovations, though nascent, could mitigate long-term supply risks.

Conclusion: A Market in Transition

The tungsten market is at a crossroads. While prices are expected to stabilize at elevated levels through 2030, the path forward is fraught with geopolitical and logistical challenges. For investors, the key opportunities lie in supply chain resilience-supporting diversified production, recycling infrastructure, and strategic stockpiling. For oil drillers, the message is clear: the era of cheap, reliable tungsten is over.

As the world grapples with this new reality, tungsten's role as a strategic mineral will only grow. Those who recognize its importance today will be better positioned to navigate the turbulence ahead.