U.S. shale gas producers are facing a new wave of costs due to the sharp rise in tungsten prices. This development threatens President Donald Trump’s goals to increase fossil fuel production.
Tungsten is an ultra-hard metal used in drilling bits and makes up up to 75% of the weight of these parts. However, China’s export restrictions on critical metals have narrowed global supply. As a result, prices jumped from $330–340 per ton in early February to over $600.
China’s dominance is tightening the global market
According to the U.S. Geological Survey, China controls more than two-thirds of the world’s tungsten production. This makes it difficult for the U.S. to find alternative sources.
Supply chain manager Yaseer Ismail notes that PDC drill bits used in oil fields now cost between $3,000 and $25,000 more. These drill bits are considered the “workhorses of the field” in oil exploration due to their wear resistance.
Trump’s policies backfired
The new tariffs imposed by the Trump administration on China have indirectly dealt a blow to the energy sector. In response, China has restricted exports of five key metals, including tungsten.
The US Department of Energy provided a government grant to Texas-based Melt Technologies for tungsten recycling. However, experts say this initiative will not be enough to alleviate cost pressures in the short term.
Energy companies are losing profit margins
Analyst Mark Chapman stated that rising metal and steel costs could reduce the profit margins of oilfield service providers by 0.2% to 0.5%. Giant companies like SLB and Halliburton experienced sharp declines in their second-quarter profits.
Brent oil prices fell below $65 on Tuesday, showing a more than 12% decline since the beginning of the year.
HSBC analyst Samantha Hoh emphasized that the sector is under pressure, saying, “It’s very difficult to pass on increased costs to prices in a period of weak market demand.”
