Major Chinese white tungsten concentrate producer China Molybdenum said it is to set up a special purpose fund to build up its tungsten reserves.

The fund, which will be allocated a maximum of three billion yuan, will be financed by self-raised funds and will build up the company's commercial reserves by acquiring tungsten concentrates and other tungsten raw products, China Molybdenum said in a statement on Tuesday.

The total volume of the reserves will not exceed 46,000 tonnes (equivalent to standardised tungsten concentrates), representing about one-third of China's total production volume in 2014, the company said.

"Building up a commercial reserve is equivalent to acquiring tungsten resources at low cost, which will help strengthen the pricing power of the Chinese tungsten industry in the global market and enhance the company’s leading position in the domestic and overseas tungsten industry,” the company said.

The reserve will acquire the tungsten through market purchases at the prevailing price, it added.

The current price of tungsten concentrates has fallen below the production costs for most of the domestic primary tungsten producers, according to the company.

On Monday, China Minmetals Nonferrous Metals and Ganzhou Tungsten Assn both slashed their prices for tungsten concentrate for this month, marking the second month in a row of price cuts and further dampening market sentiment.

China is the largest producer of tungsten in the world, accounting for approximately 85% of global supply.

China Molybdenum, the world’s largest single-mine producer and the second largest producer of tungsten concentrates in terms of volume, accounted for about 11.4% of China's total production in 2014, it said. 

Rena Gu