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Price Hike in Molybdenum Industrial Chain Picked Up Speed

Affected by industry-wide joint production restriction, prices of molybdenum concentrate, molybdenum oxide and ferromolybdenum surged across the board. Following the average rising margin up to 1% to 2% on May 23, on May 24, prices of molybdenum concentrate and molybdenum oxide again were adjusted upward by 50 yuan per tonne, rising by 5%, which presented an accelerated rising trend, in the recent months it has risen by 15% to 25%. Currently, large mines returned to the proximity of break-even point, the price-bolstering intention is obvious, supply of market spot goods is in shortage.

On May 12, 9 domestic molybdenum mine backbone enterprises published a joint proposal, on the basis of 9.18% nationwide production reduction of molybdenum concentrate last year, this year a 10% production reduction would continue, at present this policy is being enforced smoothly. China’s molybdenum ore reserve accounts for about 40% of global total, driven by domestic production restriction for price stabilization and huge rise in international market, the profit-earning standard of molybdenum industrial chain is expected to rise.

Owing to long-term low price level of molybdenum concentrate, on May 12, molybdenum mine backbone enterprises convened a meeting, which considered that molybdenum market prices had run seriously contrary to industry fundamentals and market supply-demand relationship, and lower than average production cost of the industry, thus severely threatened survival and development of China’s molybdenum industry. All attending enterprises unanimously agreed to continue control of capacity, reduce output, and refrain from joining low-price dumping. Furthermore, the meeting encouraged enterprises to actively take part in national reserve of molybdenum products and reduce sales, and explored ways to propel new model of commercial reserve, and together safeguard the market order of molybdenum raw materials.

Judging from supply and demand condition, China has 4.30 million tonnes of molybdenum reserve, ranking top worldwide with a percentage of up to 39.73%. From 2006 to 2015, global molybdenum metal output rose from 183,800 tonnes to 266,700 tonnes, growing by 82900 tonnes. In the past 9 years, China’s output of molybdenum metal rose rapidly from 43,900 tonnes to 101,000 tonnes, growing by 57,100 tonnes, annual compound growth reached 9.7%. Owing to rapid increase in the supply of China’s molybdenum ore, molybdenum industry for several consecutive years was trapped in over supply situation, molybdenum concentrate price fell continuously. Last year, price of 45% molybdenum concentrate fell below 700 yuan/tonne, currently it has returned to the fluctuation zone from 985 yuan to 1055 yuan/tonne.

According to relevant manufacturers, recently large mines experienced fast consumption of stock, within the short term supply of spot goods will be comparatively strained. Domestic and overseas prices of molybdenum raw material both rose considerably, importing raw material is relatively difficult, but it too developed certain supporting role. Meanwhile, ferromolybdenum factories actively enquired prices, market transaction increased, prices of ferromolybdenum and molybdenum chemical products both were raised to certain degree, which gave relatively adequate support to the price hike in the raw material market. Currently some large ferromolybdenum factories give quotation as high as 75000 yuan/tonne, downstream traders followed the trend. Furthermore, prices on the international market has risen significantly, which will also further boost confidence of the domestic market, the upward path of ferromolybdenum market may be reopened, the prosperity degree of molybdenum industrial chain is expected to improve.