Moly demand holds steady

China continues to dominate the world supply of molybdenum, accounting for between 85 and 90% of annual world exports of ferromolybdenum. The country also accounts for 55% of molybdate and 15% of molybdic oxide exports.

However, China’s grip on molybdenum is expected to loosen. The country’s current role in bridging the gap between Western World supply and demand may only be temporary. Preliminary data for 1997 shows a drop in exports of molybdic oxide, ferromolybdenum and molybdates.

As China’s steel industry grows, so will its molybdenum requirements.

Ferromolybdenum demand will reach 14,000 tonnes per year by 2000. Within a few years, this could mean that it may no longer be in a position to hold the world market to ransom, as it did when prices rose in 1993 and some Chinese exporters delayed shipments and held out for still-higher prices.

Instead, Chinese exports will be diverted to domestic consumers. It has even been suggested that China will turn into a net importer of the metal. In any event, the “China factor” will cease to be such a highly uncertain variable in world supply.

Molybdenum prices rose spectacularly in late 1994 and 1995, driven by strong demand from steel producers, to a 15-year high of US$18 per lb. on the back of a turnaround in the world economy, aggravated by inflexible supplies in the West and an irregular pattern of Chinese exports. However, by the end of 1995, the market was back down below US$5 per lb., as new production came on stream and exports from China picked up again. Prices have since remained within their historic range of US$2 to US$5 per lb., where they look set to remain. The major influences on prices in the foreseeable future will be demand from steel producers, the pattern of exports from China and the ability of primary producers to act as flexible swing producers.

Western World molybdenum demand rose by an average of 3.2% between 1992 and 1996, fueled by growing production of stainless, alloy and tool steels, which together account for 80% of world consumption of the metal. Demand will continue to grow by between 2 and 3% per year, but will be matched by production.

Future molybdenum demand from the various steel sectors depends partly on the unit consumption of molybdenum in that steel, because steelmakers want to add as little alloy as possible, without reducing performance, in order to reduce their output costs. Steel usage is forecast to show only low rates of growth for the next few years.

— The preceding is an excerpt from a report entitled The Economics of Molybdenum, published by Roskill Information Services of London, England.