Winter Capital

THE US DEFENCE INDUSTRIAL BASE + THE AI BUILDOUT ARE ABOUT TO COLLIDE IN THE SAME SUPPLY CHAIN, CREATING THE FIRST TUNGSTEN SUPERCYCLE. Bloomberg just reported on the 557% tungsten rally. Here's the thesis on why they are wrong and why this isn't a rally. It's a supercycle. Tungstens uptrend was happening over a eyar before the Iran/US disruption. It was first triggered by geo-political policy via US/China decoupling. The U.S NDAA ban goes live January 1, 2027. No Chinese-origin tungsten in any US defence contract. Not a proposal. Law. Bipartisan. Signed. China controls 82% of global supply. And they've already stopped exporting. Every prior tungsten price shock, WWII, Korea, 2012 was driven by defence demand alone. When the war ended, prices collapsed. One buyer disappeared and the cycle ended. But here's THE MOST VITAL DIFFERENCE FROM ANYTHING ELSE IN HISTORY This time something exists that has never existed before in tungsten's history: a second structural buyer that doesn't care about war or peace. Semiconductors. TWO SECTORS THAT ARE GOING TO SIPHON 60% OF THE SUPPLY BY 2030 Every chip at ≤22nm nodes uses tungsten plugs connecting transistors to copper wiring. A single 300mm wafer uses 2-5g of tungsten. $TSM processes 9.6M of those wafers a month. The CVD chambers depositing films onto $NVDA, $TSM, $INTC wafers run on tungsten hexafluoride, a direct downstream product of APT. The sputtering targets in PVD deposition weigh 2-15kg each and get consumed over 200-500 wafers. The heating elements in wafer annealing furnaces run at 2,200°C+ continuously. Semiconductors weren't a meaningful tungsten consumer until sub-22nm nodes went to mass production around 2016-2018. AI data centres only started scaling in 2023. This demand vertical literally didn't exist during any prior tungsten squeeze. The semiconductor industry consumed 2,500t of tungsten in 2024. By 2030 that doubles to 5,000-6,000t. For context: total non-Chinese global tungsten production is only 14,000t. Semiconductors alone going from 2,500t to 5,500t means the chip industry's share of non-Chinese supply goes from 18% -> 39%. And that's before defence demand, which is the fastest-growing end market at 10.8% CAGR. This is why this isn't a spike. It's a supercycle. The NDAA legally mandates non-Chinese tungsten for defence. China's export ban physically enforces it on everyone else. The result is the same. ALL Western demand, defence and commercial, funnels into the same two producers. Even if Iran de-escalates tomorrow and defence urgency fades, $TSM still runs 9.6M wafers a month. $NVDA still needs tungsten hexafluoride for every CVD chamber. $ASML's customers still need PVD sputtering targets. The AI buildout doesn't stop because a ceasefire gets signed. The demand floor is structural, not cyclical. That has never existed before in tungsten's history. This is the first tungsten supercycle not because of war, but because war and AI collided in the same supply chain at the same time. So where does the West actually get it? There are only two Western producers at meaningful scale: • $EQR.AX -> 3,000-4,000t/yr (Mt Carbine, Australia + Barruecopardo, Spain) • $ALT -> 5,300t/yr (Sangdong, South Korea + Panasqueira, Portugal) Combined that's roughly 50-70% of all non chinese tungsten output. EQR: 21-29% of Western supply (A$1.8B MC) ALT: 30-35% of Western supply ($4.4B MC) That's the entire NDAA-compliant supply base for $LMT, $RTX, $NOC, $GD, Anduril, and every defence prime such as $RHM.DE and $BA.L. And it's not just the US. Europe imports 31% of its tungsten from China and... China has already cut them off. The EU Critical Raw Materials Act lists tungsten as both critical and strategic. $BA, $RHM, $LDO, $HO, the entire NATO industrial base is competing for the same Western supply. The NDAA is the legal deadline. China's export ban is the physical one. Both point to the same two producers. Same structure as $AXTI / Sumitomo before the InP re-rate. These companies were rated as boring material miners. Now they are in the middle of the largest two capexes in the world. AXTI did 1,000% in a year on thesis recognition. Then 4x'd in 3 months when the supply squeeze became undeniable. Tungsten is the densest practical metal on earth. No substitutes in: •Armour-piercing rounds •Kinetic energy penetrators -> Javelin, TOW, every modern anti-tank munition •Missile components and counterweights in fighter jets •Machine tooling that manufactures the ammunition itself This EXACT SITUATION has happened before. During the Korean War the US cut off Chinese tungsten and scrambled to stockpile from allied producers. Tungsten traded at 0.62% of the gold price. The US sent government engineers to develop the Sangdong mine in South Korea and agreed to buy ALL tungsten produced. 73 years later $ALT just restarted that exact same mine. Same deposit. Same geopolitical driver. Today tungsten trades at 0.23% of gold. That's a third of the Korean War ratio. APT at $2,250/MTU (Fastmarkets weekly benchmark) with spot transactions hitting $3,000/MTU. Korean War equivalent at today's gold price: $8,000/MTU. -> +166% from here just to match a ratio from 1952. Gold is already pricing in the world that makes tungsten strategically critical. Tungsten hasn't caught up. This isn't theoretical. It's happening in real-time. APT prices have gone from $863/MTU in late December to $3,000/MTU spot last week. +248% in 12 weeks. The weekly gains not decelerating. (Up another $150/MTU (+7%) this week alone) And the Chinese domestic market is now diverging from the Western market. SMM reported on March 14 that Chinese downstream buyers are going on strike three mine auctions failed in the same week as buyers resist record prices. Meanwhile Western spot hit $3,000/MTU the same day. Two separate markets are forming. A Chinese domestic market where buyers can push back. And a Western NDAA-compliant market where defence primes have no alternative and will pay whatever it takes before January 2027. $EQR and $ALT sell into the second one. TLDR: a bidding war between hyperscalers with infinite capex and governments with infinite money print for defence across the entire NATO alliance. For a material controlled by two Western producers. Even as of today, China has refused U.S request to help the Strait of Hormuz, further de-coupling. Please call out any misinfo/bear takes on this thesis. I spent a lot of time re-reading the same points to make the post cleaner, so potential for misteps. DYOR. Not financial advice.