The molybdenum market story in 2023 has been one of volatility and uncertain demand-supply outlook. With a less dramatic downside seen from September, S & P Global here unpicks the fundamentals behind this year’s price trends.
Molybdenum (Mo) dynamics have stabilised somewhat since prices hit record highs in February, when a series of acute factors – compounded by the sustained supply deficit – drove prices to almost $40 per pound of Mo contained (/lb Mo).
Currently, future sentiment in the molybdenum market is more positive, with projected increase to supply, and strong counter-cyclical demand for Mo-bearing steels giving upstream demand support, largely in contrast to other metal alloys and the general steel markets.
Copper mines in Chile and Peru – which produce molybdenum as a by-product – are projected to increase their molybdenum output, according to data from S&P Global Market Intelligence, with new projects or increased capacity utilisation improving supply dynamics. Total production is projected to reach a decade-high for molybdenum supply by 2025.
However, it is unclear to what extent these projects will fulfil supply projections, with even the most optimistic of forecasts restrained by growing global demand and improvements in crude steel production volumes. Additionally, existing molybdenum projects have experienced degradation in ore grades, limiting volumes available, particularly on the spot market.
Going back to the outset of the “volatility period” – which saw molybdenum oxide prices almost double from around $20/lb Mo to peaks of $40/lb Mo – the market was experiencing its third year of supply deficit, with global usage at 631.5 million pounds vs production of 577.8 million pounds last year, according to figures from the International Molybdenum Association (IMOA).
Prior to the price rally, demand sentiment from key consuming industries was poor, which – alongside depressive macroeconomic factors like the European energy crisis, fears of US recession, and China’s zero-covid policy – combined to push buyers away from long-term arrangements, preferring to source material as required on the spot market.
However, demand recovered beyond expectations, creating an acute drive for molybdenum units via the trader-focused distribution network, compounded by geopolitical unrest in key production areas of South America, and short-term issues with European production and logistics.
Higher prices were sustained through February due to a lack of prompt material availability, particularly in Europe, with molybdenum prices seeing a greater degree of regionality, and a wider spread of achievable prices as a result.
Prices declined rapidly March-April as high interest rates, the volatility, and a poor demand outlook deterred traders from speculative position taking, preferring to deal back-to-back or focus on long-term contract allocations, with many taking large losses on devalued material.
Larger sellers cut offers to target liquidity in the Chinese domestic market, according to market participants. This created an uptick late-April as the import window opened and Mo-bearing products began to show stronger signs of demand recovery as compared to the commodity steel markets.
Since then, prices have been less volatile, with the molybdenum market supported by strong countercyclical performance in the aerospace, defence, and offshore oil, gas and renewable sectors.
As demonstrated by traded volumes tracked by S&P Global Commodity Insights, liquidity following the volatility period has been largely concentrated in the Asian markets, characterised by active short covering.
In comparison, the European market was proportionally diminished in terms of traded volumes.
China is increasingly a net importer of molybdenum products, with strong ferromolybdenum tender volumes recorded of around 14kt in July, decreasing through to September due to a visible pricing downtrend and falling upstream prices, but still supportive at the average consumption levels of around 10 kt a month.
South Korean converters have been heard turning increasingly to formula-based buying as a result of the volatility, described by one Asia-based trader as in contrast to when “they used to buy at any price”.
Traded volumes for molybdenum oxide in Europe have comparatively decreased, with ferromolybdenum (FeMo) prices struggling to sustain positive conversion margins from the oxide input, with negative margins through the summer into late September.
Though demand for high-alloy, Mo-bearing steels remains steady, the overall market sentiment for the carbon and stainless-steel markets in Europe has been negative. As a result, some traders have preferred to source FeMo directly on an as-needed basis, with stocks of molybdenum oxide in Europe reported to be thin on a lack of conversion activity and associated inter-trade demand.
Armenian ferromolybdenum has also had a downward price pull on the market due to its competitive cost structure, with prices reported dollars below values for western material.
The recent Azerbaijan-Armenia conflict has reduced this pressure, and while the effect on mining activity was said to be limited, speculated impacts on transport and other logistical elements. Some offers for Armenian material were heard as withdrawn from the spot market to ensure fulfilment of long-term contract obligations in the coming months.
By Benjamin Steven
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