US Molybdenum Metal Prices Rose Sharply on China Supply Uncertainty

molybdenum metal image US molybdenum metal prices rose sharply in the first week of February, fueling US concerns over the availability of imports from China amid the coronavirus outbreak.

US market participants expressed uncertainty regarding the length of lead times for delivery of Chinese metal to replenish inventories in the US.

Multiple provinces in China announced the extension of the lunar new year holiday around 30 January, and supply concerns began to permeate the US spot market the following week.

Prices have climbed since late January on supply concerns. Offers for vacuum-grade molybdenum scrap, which market participants say are used as a proxy for molybdenum metal prices, were hovering within the $16-17/lb delivered US consumer range in late January. But recent sales of molybdenum metal rose to as high as $19-20/lb, and traders noted offers as high as $23/lb.

Some suppliers opted to take advantage of the hike in prices and sell volumes, while others expressed reluctance to sell amid a seemingly tightening supply and the potential for further price increases.

molybdenum metal image

While molybdenum oxide prices have risen over the same period, US feedstock prices are not rising as sharply as metal prices, untethering from the typical gap between finished product and feedstock often used as a gauge of where to bid and offer for metal volumes.

US imports of unwrought molybdenum fell by 19pc to 586 metric tons (t) in 2019, an eight-year low. China still is the largest supplier of the metal to the US, despite only comprising 37pc of imports into the US, down from 52pc the previous year.

The decline in imports throughout last year could mean a shrinking supply of leftover inventory, barring a large increase in January 2020 imports or a ramp-up in metal production by domestic suppliers.

Additionally, consumer appetite for stainless and specialty steels appears to be strengthening, as demand for stainless steel scrap picked up in recent weeks, lifting prices higher.

Molybdenum metal prices could continue to increase if Chinese producers experience setbacks in ramping up production to previous levels for export. On the other hand, using the price vacuum-grade molybdenum scrap delivered to a consumer as a comparable, the largest spread between scrap and molybdenum oxide in nearly two years the US has been around $7.50/lb.

Taking the recent sales of molybdenum metal at around $19.50/lb and the Argus molybdenum oxide price of $10.75/lb assessed 6 February, the spread is $8.75/lb.

Other suppliers, such as Canada and Germany may attempt to capitalize on those margins, but the arbitrage opportunity likely cannot last for an extended length of time. A rise in molybdenum oxide prices might result as more is used for conversion, which would line up with recent increases in international prices.


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