Roskill estimates that the iron and steel industry accounts for around 80% of primary molybdenum use, while superalloys, molybdenum metal and chemical uses account for the remaining 20% of primary molybdenum use.
Following a slight recovery in 2018, the molybdenum oxide price declined by 4.1% in 2019, as fears of a trade war between the USA and China hurt market sentiment. Demand dynamics swung from a three-year successive growth to a 2.4% decline in 2019, underpinned especially by markets in Europe and the USA, contributing to the price weakness over the year.
In light of the price and demand trends, molybdenum supply edged up by only 0.8% in 2019, a similar growth rate to 2018, but well down on 2017’s 13.1% supply growth. China remained the world’s largest producer of mined molybdenum in 2019, with production rising by 2% y-o-y, however production from Chile, the world’s second-largest producer, dropped by 10%. Supply increased in the USA, Peru and Mexico, the next three-largest producers, which offset the drop from Chile.
Most molybdenum supply is produced as a by-product from the copper mining industry. In 2019, Roskill estimates that 73% was from by-product sources with only 27% of supply coming from primary molybdenum mines. These shares used to be far more evenly matched, but the industry responded to the last period of weak prices by curtailing capacity at primary mines, or by outright closures. By-product mines were far less affected by that downturn as these mines’ primary focus is the copper market.
The molybdenum industry faces new challenges in 2020, as the world grapples with the COVID-19 pandemic. Various confinement measures imposed by governments across the world have resulted in a sharp slowdown in economic activity, while some mines have also been forced to operate at a reduced rate. The molybdenum oxide price has fallen by 18% y-o-y in Q1 2020 and some miners have responded by cutting back production at certain operations.
The scale of the impact that COVID-19 could have on the market is constantly evolving. Longer-term fundamentals should be supportive of the molybdenum market, however, with Roskill expecting output of steel and stainless steel to recover from 2021 onwards.