On September 21st, Xiamen Tungsten Industry (600549. SH) announced that the company has applied for arbitration to the Beijing Arbitration Commission regarding the matter of Luoyang Luanchuan Molybdenum Industry Group Co., Ltd. (603994. SH, hereinafter referred to as "Luoyang Molybdenum Industry") violating the provisions of the "Joint Venture Contract for the Establishment of Luoyang Yulu Mining Co., Ltd." by ceasing to provide tailings to Luoyang Yulu Mining Co., Ltd. (hereinafter referred to as "Luoyang Yulu"), resulting in the complete shutdown of Luoyang Yulu.

The announcement stated that the total amount involved in the arbitration case is estimated to be 116 million yuan (temporarily calculated until August 31, 2026). Recently, the company received a notice of acceptance from the Beijing Arbitration Commission. Due to the fact that the case has not yet been heard in court, the impact on the company's current and future profits is uncertain.

Xiamen Tungsten Industry stated to the Economic Observer that the company had issued a notice in July regarding the suspension of production in Yulu, Luoyang. This announcement is made because the company has officially initiated arbitration and obtained acceptance.

Luoyang Molybdenum Industry stated to the Economic Observer that the company adheres to compliant operations and will actively respond to the lawsuit regarding this matter.

On July 1st of this year, Xiamen Tungsten Industry issued an announcement regarding the suspension of production in Yulu, Luoyang. According to the "Announcement on the Suspension of Production of Luoyang Yulu Mining Co., Ltd., a subsidiary of Xiamen Tungsten Industry" (hereinafter referred to as the "Suspension Announcement"), Luoyang Yulu's main business is the comprehensive recovery of scheelite from the tailings of Luoyang Molybdenum Industry Mineral Processing Branch 2 after molybdenum selection. Recently, Luoyang Molybdenum Industry suspended the supply of tailings to Luoyang Yulu, making it impossible for Yulu to produce.

The "Production Suspension Announcement" shows that Luoyang Yulu is a joint venture subsidiary of Xiamen Tungsten Industry and Luoyang Molybdenum Industry. In September 2001, Xiamen Tungsten Industry and Luoyang Molybdenum Industry signed a joint venture contract to jointly establish Luoyang Yulu Mining Co., Ltd. Both parties agree to establish a joint venture company, Luoyang Yulu, with Xiamen Tungsten Industry contributing in cash and holding 60% equity. Luoyang Molybdenum Industry contributes with assessed assets, including tangible and intangible assets such as molybdenum tailings that meet tungsten selection requirements, stored molybdenum tailings, tailings pond usage rights, and other physical assets, holding 40% equity.

According to the "Production Suspension Announcement", the production and sales volume of scheelite (WO3 metal) in Yulu, Luoyang in 2025 will be 1924 tons and 1614 tons respectively. In the first half of 2026, the production and sales volume of scheelite (WO3 metal) will be 685 tons and 669 tons respectively. In 2025, the operating revenue will be approximately 363 million yuan, and the net profit will be approximately 123 million yuan.

According to the reporter's understanding, the focus of the dispute between the two sides actually involves policies related to tungsten quotas. From the current process, the relevant quotas are issued by relevant departments to each province (city), and then given to tungsten production enterprises accordingly.

Industry insiders told reporters that Luoyang Molybdenum Industry's cessation of providing tailings and the so-called "compliance" may involve issues with tungsten mining indicators.

Domestic departments have long implemented total quantity control and indicator management for tungsten mines. In March 2024, the Ministry of Natural Resources issued the "2024 Tungsten Mining Total Quantity Control Index (First Batch)", which clarified the total quantity control index of 62000 tons for the first batch of tungsten mining (tungsten trioxide content of 65%) in 2024.

The aforementioned industry insiders pointed out that in the early years, Luoyang Molybdenum Industry provided tailings to Luoyang Yulu, which belongs to the category of "comprehensive utilization of tailings", and therefore can be sustainably supplied according to relevant contracts. In recent years, regulatory authorities have paid close attention to tungsten containing resources. For example, tungsten concentrate produced from the re selection of tungsten containing tailings is included in the category of "tungsten ore product output". Eventually, this part of tungsten concentrate may be included in the total amount of tungsten ore mining. If relevant parties still treat it as "comprehensive utilization of tailings", there may be a risk of violation.

He gave an example that Luoyang Molybdenum Industry is the source of mines/tailings, while Luoyang Yulu is a joint venture processing company. Regulatory authorities may emphasize the necessity of tungsten resources and cannot simply handle them through joint ventures.

Another industry insider pointed out that the management of tungsten ore indicators is not the first implementation in 2026, and there may be other compliance measures in the industry that do not necessarily require direct suspension of supply.

Regarding the possibility that Luoyang Molybdenum Industry may not supply tailings to Luoyang Yulu due to tungsten mine quotas, Xiamen Tungsten Industry stated that the provision of tailings by Luoyang Molybdenum Industry is based on a contract signed by both parties. Xiamen Tungsten Industry requires Luoyang Molybdenum Industry to fulfill the contract and provide tailings based on the contract.

Regarding whether the subsequent contract can be re executed, Xiamen Tungsten Industry stated: "The company respects and cooperates with the national strategic mineral resources supervision, and protects its legitimate rights and interests in accordance with the law and regulations. Both parties should adhere to the spirit of the contract and safeguard the normal operation of Luoyang Yulu in accordance with the law.

(Author Pan Juntian)