Global Molybdenum Market Is Stable but Demand Outlook in 2020 May Worsen

global molybdenum market image The global molybdenum market is poised for a supply and demand rebalance characterised by stable spot prices, but prolonged uncertainty could worsen demand outlook in 2020.

After a volatile 2019 — marked by a raw material supply crunch in the first quarter followed by low demand in the second half of the year — prices for molybdenum and its alloy are likely to stabilise, a trend already noted in the final quarter.

As inventory stocks are depleted, consumers secure lower or flat supplies on long-term contracts and producers plan on optimised production for the upcoming year, a fundamental balance is in sight for the minor metal, but demand is set to be the key driver for the market and liquidity.

Room to manoeuvre

Deteriorating economic growth, spurred by ongoing trade tensions, weighed on metals demand in 2019 and is expected to drag on demand in 2020. Warnings on lower growth in the automotive industry and the steel sector painted a weak picture for demand in the international markets.

With the European steel industry struggling under burgeoning costs, all eyes are on Chinese demand growth, the world's biggest consumer of molybdenum. Molybdenum is used in the stainless steel industry, as a catalyst in the petroleum and plastics sectors, and in the chemicals, construction and automotive industries.

The World Steel Association expects global steel demand to grow by 1.7pc in 2020, albeit at a slower pace compared with a 3.9pc increase in 2019. Chinese steel demand strengthened in 2019 because of growth in the real estate sector, but is forecasted to slow down in 2020.

On the supply side, although molybdenum production tends to remain stable as it is a by-product of copper, weather-related events, labour issues and lower ore grades have reduced output in recent years. Hence, concerns over such factors linger.

global molybdenum market image

Lower ore grades, especially in the world's top producing country, Chile, dragged output down in 2019. For example, owing to falling ore grades, Chilean producer Antofagasta reduced output from its Los Pelambres mine to 9,000t in the first nine months of 2019, down 10pc from the 10,000t produced in the same period in 2018.

According to Chile's central bank statistics, the value of total molybdenum exports between January and November 2019 dropped to $285mn, which is $41mn lower than 2018. But higher than expected demand in 2020, coupled with the possibility of excess or curtailed supply, are likely to have an impact on the market.

To mitigate these fluctuations, many consumers sought volume optionality in long-term contract negotiations, but producers were unable to meet these requirements for flexibility fully, leading to consumers either acquiring less material for 2020 than in 2019, or buying just enough stocks to meet stable demand.

This also meant that some consumers were opting to keep a bigger share of buying for the spot market. So, any changes to demand/supply balance is likely to increase buying or selling activity on the prompt, and consequently improve liquidity in the market.


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