Our Commodities

Molybdenum

Molybdenum is regarded as a strategic metal with no direct substitutes. It has a specific gravity of 10.25, melting point of 2,623oC, and a boiling point of 4,639oC. It is a key ingredient for creation of strong anti-corrosive steels. More specifically, these properties are valued by industry as the metal helps increase the hot strength of alloys, helps increase corrosion resistance, and helps increase strength and toughness of steel.

More than 75 per cent of world molybdenum production is consumed by iron and steel companies as an alloy in stainless and full-alloy steels. Molybdenum not only strengthens and hardens steel, but renders it capable of withstanding extreme temperature fluctuations. The remaining 20% or so find use in chemical applications such as catalysts and lubricants.

 

Molybdenum Production & Consumption

Each year, over 450 million pounds of molybdenum are consumed by the global market, with Western Europe being the largest consuming market segment. Over 10 years, it has grown from consuming less than 100 million pounds per year, up to some 140 million pounds in 2007. However, there are no major producers of molybdenum in Europe, with the major producing regions located in Asia, South America, and North America. As a result, the Myszkow deposit is strategically located to provide molybdenum to the largest consuming segment of the market. Its location within the EU potentially allows for easier and quicker access to the European market, smaller transport costs, and less trade barriers when compared with other molybdenum producing regions.

Production

Consumption

Furthermore, China, the largest producer of the metal, and also the fastest growing consumer, are implementing policy changes that are restricting the supply of molybdenum and other strategically important minerals to the Western world. Historically, China has been a large exporter of the metal. However, the following measures have been introduced by the Chinese government which looks set to change this historical trade:

  1. 1. Foreign companies would be prohibited from investing in or exploring for tungsten, tin, antimony, molybdenum and rare earth metals beginning December 1, 2007.
  2. 2. Raised export taxes on molybdenum in 2007. Export taxes for moly oxide are now 15% and for ferro-molybdenum are 10%.
  3. 3. Reduced VAT tax rebates on certain molybdenum products effective July 1, 2007 and the 5% rebate on ammonium molybdate, moly oxides and hydroxides was eliminated. The rebate for moly bar and stick, moly rolled products and moly filament was reduced from 15% to 5%.
  4. 4. Imposed export quota in July 2007. The total quota for the second half of 2007 was 16,800 tons, representing a significant reduction to 2006 export levels. The 2008 quota was set at 26,300 tons, a further reduction.

These measures are set to put further supply pressures on molybdenum coming into Western Europe.

Molybdenum Reliant Industries: Steel

Steel is the single most important sector determining molybdenum price, accounting for around 70% of total consumption. However, steel consumption is looking weak in 2009 due to global economic crisis. Nevertheless, long-term steel consumption remains at 5% to 6% growth year over year. Similarly, according to the International Stainless Steel Forum (ISSF), stainless steel demand will stagnate in the short-term but recover to a pattern of 6% to 8% demand growth year on year.

Steel consumption

Stainless steel consumption

 

Molybdenum Reliant Industries: Automotive

Like steel, the automotive sector is looking weak in 2009. Global automotive giants such as GM, Volvo, Toyota, Nissan experiencing sales declines of varying proportions. Time is required for recovery in this sector, which in turn is linked with recovery of world economies. However, on a per vehicle basis, use of molybdenum for anti-corrosion, strengthening, increased safety, and weight reduction is increasing. Furthermore, high fuel prices will likely drive the use of molybdenum in autos as manufacturers look to reduce weight, improve strength, and increase use of diesel engines.

Molybdenum Reliant Industries: Atomic Energy

High molybdenum-bearing steels and alloys are vital in atomic power generations. Overall, this sector has a robust outlook. Many existing reactors need upgrading while many more new reactors are proposed, being planned and under construction. More specifically, the global demand for clean sources of energy is increasing, with nuclear being the only large-scale commercially proven source.

 

Molybdenum Reliant Industries: Oil

Firstly, HSLA steel, which consumes some 10% of global molybdenum production is used in the production of oil and gas pipelines. Today’s projects are being constructed in more extreme temperatures, requiring more molybdenum. Not only that, but as demand for oil increases, demand for molybdenum is also expected to increase. Secondly, by 2020 global fuel regulations call for diesel and gasoline sulphur content to be cut by between 50% and 95% from 2005 levels. Desulphurisation in fuel oil refining relies on molybdenum as a catalyst in this process. As a result, the demand for molybdenum for this process is also expected to increase.

 

Other factors to consider:

    New major copper discoveries have no molybdenum as a byproduct

    Exploration projects have slowed due to the financial crisis

    There is very little idle molybdenum supply with only a few projects ready to quickly fill demand when price environment corrects itself

    There are several high cost producers in today’s market, particularly in the ex-Soviet states o Production costs around $13/lb not viable at today’s prices so further production cuts are expected

    Unfunded projects may face delays due to high capex requirements

    China shifting from exporter to importer of molybdenum recognizing it as a strategic metal vital for economic growth

So, these factors suggest a distinct possibility of a supply squeeze in the molybdenum market and resultantly a recovery in the price of molybdenum.