Asian buyers have ramped-up molybdenum procurement in the spot market on expectations of tightening supply, driving metal prices higher. But a weakening global demand outlook as key consuming sectors, including the oil industry, face severe downturns may prevent a sustained recovery in prices.
European prices for 57pc grade oxide powder rose by more than 8pc week on week to $8.85-9.00/lb in warehouse Rotterdam on 30 April, up from an average range of $8.15-8.35/lb through the month, according to Argus assessments. Ex-works prices for spot material in Busan and Tianjin rose above $9/lb on 30 April, with offers as high as $9.15/lb heard in the market. Argus does not assess powder prices in South Korea. Argus prices for 57pc grade roasted concentrates rose by 1.6pc from last week to $22.20-22.30/kg ex-works China on 30 April.
Buying of molybdenum oxide powder units has increased sharply during the past two weeks, especially in China and South Korea, amid growing concerns over global supply constraints. A key driver behind increased Chinese buying is a tailings dam leakage that has forced the closure of Yichun Luming's molybdenum concentrates production plant. Just days after the closure, top molybdenum-producing countries Peru and Chile restricted movement to only essential services, reducing production levels. And Freeport McMoran's decision last week to shut down the Climax molybdenum mine in the US for the remainder of 2020 added to concerns over tightening supply.
The supply constraints came as Europe faced a sharp slowdown in demand, spurred by the Covid-19 pandemic. Any excess material on the spot market in Europe has been absorbed by Asian buyers, helping to stabilise prices above $8/lb in Europe. This week, Chinese buyers soaked up more material ahead of China's Labour Day holiday from May 1-5, market participants said.
Some market participants expect demand in Europe to rise, allowing prices to firm, as lockdown measures are eased in countries such as Spain and Italy. They also expect supply tightness to influence prices.
But other market participants have raised doubts over the potential for a sustained, demand-driven price recovery. The price increases are "not linked to Europe" and real demand, one participant said, adding that the volumes sold in Europe are heading to China.
Falling oil prices, higher levels of unemployment and a worsening outlook for global and European GDP growth signal lower demand for Europe, he added. Molybdenum is a by-product of copper production and is used in the stainless steel sector, in aerospace superalloys and in the oil and gas industries.
