Claiming 116 million yuan, Xiamen Tungsten and China Molybdenum are facing off in court over a supply suspension triggered by the skyrocketing tungsten price. Can policy compliance terminate a signed long-term contract?
On September 21, 2026, Xiamen Tungsten announced that it has submitted an arbitration application to the Beijing Arbitration Commission, as the dispute arose after China Molybdenum stopped supplying tailings to the joint venture Luoyang Yulu from June 30, which led to a full production shutdown of the latter. The total claimed compensation is tentatively set at 116 million yuan, including 56.4454 million yuan of losses caused by the supply cutoff and 56.767 million yuan of losses from suspended sales.
On September 22, China Molybdenum responded: "We take compliant operation as our bottom line, and will actively respond to the legal proceedings related to this matter."
The term "compliance" lies at the core of this dispute. China Molybdenum stated that the supply cutoff is due to the national compliance management requirements for tungsten mines. However, the total volume quota management for tungsten mining is not a new policy introduced in 2026. In the first batch of quotas for Luanchuan County in 2025, China Molybdenum was allocated 6150 tons, and the joint venture operated normally throughout that year. The policy regulation has long been in place, so why did compliance become an insurmountable obstacle exactly when tungsten prices skyrocketed and the joint venture's profits doubled?
Quota management has always been in place, yet the supply cutoff occurred precisely when tungsten prices surged sharply
The compliance basis cited by China Molybdenum is the total volume quota management for tungsten mining, but this policy did not emerge in 2026. Since 2023, the total tungsten mining quota has no longer distinguished between primary mining and comprehensive utilization. In 2024, the document issued by the Ministry of Natural Resources clearly required provincial authorities to establish a quota allocation and dynamic adjustment mechanism. In 2025, China Molybdenum was allocated 6150 tons in the first batch of quotas for Luanchuan County, the joint venture operated normally the whole year, and Luoyang Yulu recorded a full-year net profit of 123 million yuan.
The reason why tungsten prices skyrocketed at this specific point in time is the key background behind the supply cutoff. On the supply side, China implements total volume control over tungsten mining with continuously tightening quotas. The domestic output of tungsten concentrate dropped by 14.75% year-on-year in the first half of 2026, while the release of new overseas production capacity is slow, further reducing the globally tradable raw material supply. On the demand side, emerging demands such as PCB drill bits for AI servers and photovoltaic tungsten wires continue to grow, and the strategic stockpiling in the military industry sector is also accelerating.
Driven by the mismatch between supply and demand, the price of tungsten concentrate rose from 137,500 yuan per ton in September 2024 to 409,300 yuan per ton in September 2026, representing an increase of nearly 200%. It once hit a record high of 1,051,200 yuan per ton in March 2026. This is not a short-term speculation, but a systematic price revaluation brought by rigid supply constraints coupled with concentrated demand release.
The supply cutoff took place on June 30, 2026, exactly at the node when tungsten prices were at a historically high level and Luoyang Yulu's profits doubled.
Luoyang Yulu recorded a net profit of 336 million yuan in the first half of 2026, exceeding its full-year net profit in 2025 within just six months. The gross profit margin of China Molybdenum's own tungsten business reached 77.48%, up 13.14 percentage points year-on-year. China Molybdenum's tungsten output in the first half of 2026 was 3496 tons, ranking among the top domestic tungsten concentrate producers. Yulu Mining is part of its tailings comprehensive utilization segment, and the company holds a 40% equity stake in it. The quota management has always been in place, the joint venture has obtained continuous tailings supply for more than 20 years, and the 2025 quota allocation was also implemented normally. The supply cutoff happened precisely at the time when tungsten prices stood at a historical high and the joint venture's profits doubled.
The market has responded through stock prices based on different levels of dependence on tungsten. After the arbitration news was announced, China Molybdenum closed at 17.81 yuan per share on September 22, up 1.25%; Xiamen Tungsten closed at 49.34 yuan per share, down 1.71%. Calculated by equity share, Yulu Mining's net profit in the first half of the year contributed less than 1% of China Molybdenum's attributable net profit, while Xiamen Tungsten's equity share accounts for about 7.6%. For China Molybdenum, the worst-case outcome is to continue ore supply or pay compensation, and the related amount is limited relative to its operating revenue scale. For Xiamen Tungsten, the worst-case outcome is losing the arbitration case and facing a complete interruption of tailings supply, which means it needs to find other sources of scheelite concentrate.
When tungsten prices are at historically high levels, the cost of alternative supply could be enormous. The capital market has already calculated this account clearly first.
Both total volume control and comprehensive utilization are official policies, and China Molybdenum chose the one most favorable to itself
There is inherent flexibility in the policies, and which provision China Molybdenum cites determines whether "compliance" is a "compulsory requirement" or a "convenient excuse".
On one hand, there is the total volume control of tungsten mining, which is the compliance basis for China Molybdenum. On the other hand, Article 39 of the new Mineral Resources Law, which came into effect in July 2025, clearly encourages the comprehensive mining and utilization of associated and symbiotic minerals, and requires effective protective measures to be taken for tailings containing useful components. What Luoyang Yulu is engaged in, which is "comprehensive recovery of scheelite from tailings", exactly falls into the category encouraged by the new mineral resources law.
How to coordinate the two policy objectives is the core issue to be adjudicated by the arbitration tribunal. The purpose of total volume control is to prevent over-exploitation, and the purpose of comprehensive utilization is to improve resource utilization efficiency. The two are not inherently contradictory. The key point is, when upstream enterprises face both policy guidelines at the same time, whether there is a compliant intermediate path? For example, adjusting the quota allocation method, adjusting the production output pace, negotiating new supply arrangements with the joint venture partner, instead of terminating the supply directly.
Judging from public information, the approach China Molybdenum chose is to cut off the supply directly. The arbitration tribunal needs to judge whether this is the only option at the compliance level. If other compliant paths exist but China Molybdenum did not choose them, then "compliance" is only an excuse for the supply cutoff, not the real reason. China Molybdenum did not state in its announcement whether it had exhausted compliance measures such as quota adjustment and output allocation, nor did it disclose whether it had conducted negotiations with the joint venture partner before the supply cutoff. The absence of these procedural facts greatly reduces the persuasiveness of the "compliance" justification.
An agreement signed until 2032, the arbitration tribunal needs to rule whether it is still valid
The significance of this case goes far beyond the two companies. The arbitration result will create a demonstration effect for all long-term contracts for strategic resources, and the core question is: whether policy changes were foreseeable when the contract was signed in 2001, and whether the supply obligation in the contract includes the implied clause of "making the best effort to supply within the scope permitted by policies".
The cooperation between China Molybdenum and Xiamen Tungsten dates back to 2001. The equity structure of the joint venture Luoyang Yulu is 60% held by Xiamen Tungsten and 40% held by China Molybdenum, with the operation period expiring in April 2032. This contract has been implemented for 25 years. Xiamen Tungsten explicitly stated in its announcement that its arbitration request includes confirming that China Molybdenum continues to perform its contractual obligations. This means the arbitration tribunal not only needs to judge whether the supply cutoff is legal, but also needs to answer a more fundamental question: when the price of strategic resources changes by an order of magnitude, is a 25-year-old contract valid until 2032 still enforceable?
If policy compliance can become a legitimate reason to terminate a long-term supply contract, upstream resource owners can demand renegotiation or directly cut off supply on the grounds of policy changes after prices rise sharply. If the arbitration tribunal upholds the rigidity of contractual obligations, enterprises will need to anticipate all possible policy changes when signing contracts. Against the background of continuously improving regulation in the strategic mineral industry, how to strike a new balance between compliance and contractual credibility for long-term industrial contracts has become a new proposition.
The core question that China Molybdenum's "compliance" argument needs to answer is: since quota management has long existed, why did it become an insurmountable obstacle exactly when tungsten prices skyrocketed and the joint venture's profits doubled? If compliance is the only consideration, why did this compliance requirement not stop the supply when tungsten prices had not soared in 2024 and 2025? The answer may not lie in compliance itself, but in the economic motivation behind the compliance claim.
The arbitration result remains unknown, but this case will determine a rule: when the price of strategic resources changes by an order of magnitude, whether policy compliance can be used as a legal reason to terminate a long-term contract. This answer concerns not only China Molybdenum and Xiamen Tungsten, but also all enterprises that rely on long-term resource supply contracts. If "policy changes" can become a pass for unilateral contract termination, all upstream and downstream enterprises that have signed long-term supply agreements need to re-evaluate the actual value of the contracts they hold. Long-term contracts for strategic resources are evolving from tools to lock in prices and supply volumes into letters of intent that can be torn up at any time when prices surge. Once this trend is established, the harmed party will not be limited to Xiamen Tungsten.