July 23, 2019
Despite price recovery in China observed over the last couple of weeks, the global molybdenum products market is likely to remain under pressure until the end of Q3 2019. According to market sources and industrial experts, a number of factors will contribute to that:
- Global Mo production starts to go up again while the demand increase is still uncertain
- The upward trend in China lacks fundamental support and seems rather speculative
- Summer lull in the Western markets prevents any market improvement
Molybdenum production remains static early this year while consumption decreases
Figures released recently by the International Molybdenum Association (IMOA) show that global molybdenum output was largely unchanged in Q1 2019 in YoY comparison, but demand fell by 7%. Thus, world Mo production amounted to 62,550 t and consumption – to 61,960 t. China remained the biggest player in the industry. Noteworthy, when compared to the previous quarter, the output fell by 12%, while usage – a mere 1%. This prevented prices from falling over Q2, however current higher Mo output and seasonally low demand puts pressure on the price.
Current upward price trend in China can be short-lived
In early July, Chinese Mo concentrate producers reported environmental inspections in Inner Mongolia which, combined with adverse weather in South China, causing a 10-15% drop in capacity utilization. Initially, it has caused a quite modest Mo oxide price increase – up to a mere 1% MoM. However, at the same time, after almost three weeks of silence end-users started to enter the Chinese FeMo market to book July volumes. Using tight Mo concentrate supply as an additional pretext, alloy producers tried to pass their raw material inputs on consumers. As a result, FeMo prices in China added almost 3% over three weeks, to $30.1/kg Mo.
Nonetheless, some local insiders are not very optimistic regarding further market development. They note, that despite consumers started July purchases with a delay, the volumes they book are largely unchanged from the last month. That’s why some traders are afraid that after steel mills restocking and leaving the market, lower Mo oxide supply will not be enough to keep the price up.
Market revival in China has no impact on the European market
The continuous price downtrend in the European molybdenum segment forces local consumers to delay bookings. Since the beginning of Q3, FeMo quotes in Europe have lost 4% already and as for July, 19 are heard to be $26.7-27.2/kg Mo FCA. Rare buyers decided to wait and see, hoping for even lower quotes, insiders say. Meanwhile, suppliers hope for at least price stabilization in the nearest future amid sudden trend reversal in China.
However, most players think that the downtrend will persist, given minimal activity in all segments in the Western market in July/August. For instance, both carbon and stainless steel output usually decrease in summer by 7-10% in Europe every year.
Boost in Mo production may cause a further price decrease
Despite the quite modest global market performance, the biggest Mo producers were increasing output over Q2, which can put additional pressure on prices in the coming months. For instance, Molybdenum concentrate production at Bingham Canyon Mine of Kennecott Utah Copper, a subsidiary of UK’s Rio Tinto, reached 3,760 t (2,570 t of pure Mo) in Q2 2019 (+32.4% QoQ, up 3.4 times YoY).
Peru produced 2,430 t of molybdenum in May (+2.45% MoM, +19.1% YoY), hitting a new high this year. The increase was attributed to a continuous rise in output at Toquepala and Cuajone mines (+28.1% in total), owned by Southern Copper Corp., one of the biggest producers in Peru. Ferrobamba mine managed to boost Mo output by almost 2.4 times to 245 t in May.