An AI-powered risk management platform, a derivates exchange and a market maker and liquidity provider are partnering to create a landmark tungsten price hedge using event contracts on Kalshi.

With tungsten prices up more than 500% amid mounting supply restrictions, Pillar, Kalshi and Susquehanna Predictions are structuring a new Kalshi market to protect an Ohio-based metals distributor from price volatility.

Pillar hedged tungsten exposure on behalf of an Ohio-based metals distributor using Kalshi event contracts tied to the SMM CIF Rotterdam benchmark for ammonium paratungstate (APT).

Susquehanna helped structure and price the transaction and provided the institutional-scale liquidity required to execute it.

According to the partners, tungsten is the hardest-working metal most people have never thought about. It has the highest melting point of any element and is nearly as dense as gold, making it irreplaceable in armour-piercing munitions, armour plating, jet engines, carbide cutting tools, and semiconductor manufacturing.

Export restrictions and production constraints have, however, tightened availability across the global tungsten market.

The US has no active domestic tungsten mine production. Meanwhile, expanded Defense Department procurement restrictions taking effect in 2027 will further narrow the pool of eligible sources for certain tungsten materials used in defence applications, increasing competition for available supply as demand grows.

The result has been one of the most dramatic commodity moves in modern history.

APT prices have risen more than 500% as supply constraints have intensified, and this spring they jumped as much as 94% in six weeks.

For a business that buys or sells tungsten, a swing like that can erase the margin on a contract between the day it is signed and the day it ships. This first-of-its-kind commercial tungsten price hedge, executed through an event contract market on Kalshi, provides businesses with a new way to manage volatility within a critical US mineral supply chain.

"A market that didn't exist, built for a risk that traditional tools couldn’t fully hedge," Pillar, Kalshi and Susquehanna deems its exercise, saying that unlike oil, gold or copper, tungsten has never had a listed futures market.

"Companies exposed to its price movements have had limited tools to hedge that risk, leaving manufacturers and suppliers to absorb extraordinary volatility or pass it through to customers," they explain.

HEDGE CONTEXT

Pillar, Kalshi, and Susquehanna worked together to build the new market around the SMM CIF Rotterdam APT benchmark.

Pillar translated the client’s physical exposure into a hedging strategy, Kalshi listed a contract settling on December 17, and Susquehanna helped structure and price the market and provided liquidity for the transaction.

The market trades on an open, public order book; prices are set by participants, and Kalshi does not take either side of any trade.

Pillar, founded in 2023 by former Barclays and Coinbase employees and backed by Andreessen Horowitz, has processed more than $1-billion in risk for refiners, miners, scrap dealers, and manufacturers. Its platform turns a client's physical transactions into precise hedges and manages them from execution through accounting.

Kalshi now gives Pillar the ability to serve a new category of clients: businesses whose most important input has never had a market at all.

“America’s greatest competitive advantage has always been its financial markets and its ability to engineer innovative financial products. At Pillar, we’re putting that strength to work to level the playing field in the global race for critical natural resources - giving American businesses the financial tools to compete, secure their supply chains, and thrive in an increasingly volatile world,” says Pillar CEO Harsha Ramesh.

Susquehanna institutional head Nick Volbi adds that the transaction is another example of prediction markets addressing a real institutional need. “By structuring, pricing, and trading contracts around real-world exposures, we are demonstrating how these markets can help small businesses and large institutions manage risks they face every day.”

Kalshi business development director Nicolas Hull concludes that some of the most important risks in the American economy have never had a market. "Not because no one needed one, but because no one built one. That’s what changed here. Tungsten is the first, and there’s a long list behind it."