The recent surge in molybdenum prices has sparked renewed interest in the metal from resource firms looking to benefit from an outlook dominated by supply shortages and rising demand.
Output from the world's two major production sources — China and Chile — has fallen significantly in the past two years as a result of the impact of Covid-19 and power cutbacks in China as well as lower recoveries and ore grades leading to reduced copper output in Chile.
Molybdenum is mainly a byproduct of porphyry copper production. Its consumption is closely linked to steel where it plays an important role in engineering steel and super alloys. It is used to strengthen and harden steel alloys, improve electrical conductivity and provide resistance to corrosion and wear and tear. Other applications include chemical compounds and lubricants.
Supply shortages have had a major impact on prices, especially since the third quarter of 2022. Argus assessed ferro-molybdenum (60pc Mo, fob China) in a range of $89-92/kg on 13 February, up from $40/kg on 15 August. Ferro-molybdenum is an alloy made from blending iron with molybdenum.
Molybdenum oxide and concentrate prices have also more than doubled in the past six months. Argus assessed molybdenum oxide (57pc Mo, duty unpaid Rotterdam) at $37.00-37.75/lb on 13 February, up from $15.17/lb on 15 August. Argus assessed molybdenum concentrate (45pc Mo ex-works China) at 5,300-5,330yuan/metric tonne unit (mtu) on 13 February, compared to Yn2,485/mtu on 15 August.
Molybdenum consumption will rise over the next 10 years with a supply squeeze underpinning prices in the short-to-medium term, according to Melbourne-based Peak Asset Management analyst Conor Daley.
Global molybdenum output totals around 300,000 t/yr. China is the world's leading producer and consumer of molybdenum, but its domestic supply of concentrate fell in 2022. Chile is the second-largest producer. Chilean copper miner Codelco produced 21,000t of molybdenum metal in 2021, down from 28,000t in 2020. Output for 2022 is expected to be lower than 2021 as a result of the firm's copper production reducing to 1.45mn t from 1.62mn t a year earlier.
After China and Chile, the next largest molybdenum producers are the US, Peru and Mexico, followed by smaller producers Armenia, Mongolia, Russia, Canada and Iran.
Australia does not rank in the world's top 10 producers, but there are signs of growing interest in the metal as a valuable byproduct in the copper and base metals mix.
Leading the way is the country's only molybdenum producer Newcrest Mining, which is Australia's largest gold producer and third largest copper producer. Newcrest announced in 2020 that it was building a molybdenum plant at its Cadia gold mine in New South Wales (NSW) which produces over 90,000 t/yr of copper.
The plant separates molybdenum from Cadia's copper concentrate stream to produce 50pc molybdenum concentrate in dry powder form. Output is expected to be around 4.1mn lbs/yr (1,860 t/yr), reducing Cadia's gold production costs by around $50/oz. The first shipment of molybdenum concentrate was delivered from Cadia in June 2022. At full production, the Cadia plant alone could place Australia in the world's top ten molybdenum producers, overtaking Canada and Iran.
Several other Australian miners are now actively seeking to add molybdenum to their byproduct mix at base metals projects in Australia and South America. Firms targeting molybdenum within Australia include Havilah Resources, Caravel Minerals, Investigator Resources and Caspin Resources, while Hot Chili and Culpeo Minerals are focusing on extracting molybdenum from early stage copper projects in Chile.
