TRADE REVIEW: Tight conc supply ends sideways movement in moly oxide prices

Molybdenum oxide powder spot prices are expected to soften in the short term while downstream spot demand in Europe remains slow, according to market participants, but currently sit well above the sideways pricing seen in the first quarter due to tight molybdenum concentrate supply.

Most sources said they considered $21.30/lb Mo to be a realistic floor price in May for molybdenum oxide, substantially higher than Q1 price levels.

Molybdenum oxide prices in the first quarter were stable year on year, but there was a marked shift on April 23, when prices jumped $1/lb, moving the Platts Molybdenum Oxide Powder Daily Dealer price from from $19.975/lb Mo to $20.95/lb Mo. The market was caught by surprise by a rapid increase in molybdenum concentrates prices in China and tight supply due to low mining output in the first quarter. The price jumped followed the result of a tender by China's LongYu Molybdenum Industry on April 23 at Yuan 3,750-3,800/mtu ($518-$525/mtu), above market expectations. On that day, Platts, part of S&P Global Commodity Insights, assessed the Molybdenum Oxide Daily Dealer price at $20.95/lb Mo, a year-to-date high. Platts assessed the Molybdenum Oxide Daily Dealer price at $21.75/lb Mo on May 15.

In the first quarter spot prices spiked sharply on Jan. 5 but quickly corrected below the $19.50/lb Mo threshold by the end of the month on low demand in Europe and Asia, with the floor reached on Feb. 1. Spot prices recovered slightly in the following weeks, but monthly average spot prices remained slightly below the $20/lb Mo threshold.

However, traded volumes increased over April 8-9 after a series of public holidays in regional markets. Spot prices spiked by approximately 50 cents/lb as demand increased. Platts assessed the Molybdenum Oxide Daily Dealer price at $19.75/lb Mo on April 9, with deals reported in a range of $19.65-$19.85/lb Mo in Asia and Europe.

But a reported tightness in molybdenum concentrate, mainly from Chinese converters, and low inventories in Europe, put further upward pressure on spot prices. Although moly oxide production is expected to increase in the second half of 2024, some sources argue that spot prices will remain supported by tight concentrate supply. Additionally, as some major mining companies published their first-quarter production report, data showed Q1 mining output for molybdenum at Freeport-McMoRan fell 14.2% quarter on quarter, and fo Rio Tinto 5% over the same period, while overall Q1 molybdenum output in Chile fell 17% quarter on quarter to 9,541 mt.

"Asia is the main hub for the moly oxide market," a trader told Commodity Insights.

Despite significant traded volumes, sentiment on the moly oxide spot market remained bearish over the first four months of 2024 due to an uncertain economic outlook in China and low demand from end-consumers in Europe, especially from stainless steel mills, which were rumored to be cutting production at the start of 2024. Market sources expressed mixed sentiments on demand levels. Following two industry events, one in Hong Kong and another in Shanghai which focused on the Chinese domestic market, there was no consensus on potential market trends for the first quarter of 2024 and beyond.

Over the period from January to April, 6,260 mt of molybdenum oxide were traded and reported to Commodity Insights across all assessed regional markets, a 12.80% drop compared to the same period of 2023.

Over Jan. 1 and April 26, weekly traded volumes of molybdenum oxide averaged 368 mt. Seasonal declines in trade flows were observed in the week of the Lunar New Year in Asia over Feb. 10-17 and Easter on March 30. Overall, reported deals were mainly located in Asia, with 61% of all deals reported in-warehouse Busan, and for 11% in China on an in-warehouse Tianjin/Shanghai basis. Europe lagged behind, accounting for 25% of all deals reported to Commodity Insights on an in-warehouse Rotterdam basis. This follows last year's trend when Asian trades dominated most of the market.

Outokumpu, one of the largest stainless steel producers in the world, said Q1 stainless steel deliveries in Europe dropped 17.9% year on year and 7.3% quarter on quarter. Sales revenues in Europe in the first quarter also fell 29.7% year on year and 4.3% quarter on quarter, hurt by strikes in Finland. However, overall consumption of stainless steel in Europe increased in the first quarter, despite all predictions, strengthening market sentiment.