Steel Alloys: H1 2017 trade in review for molybdenum

Molybdenum prices experienced varying trends in H1 2017 following a period of stagnation in 2016.  Ferromolybdenum prices increased to US$5.54/lb in April, their highest level for two years.  The increase in prices was the result of growing demand for molybdenum from stainless steel producers and the prolonged closure of producers in China resulting in a tightening of supply availability.  Ferromolybdenum prices fell back over the remainder of Q2 as producers increased output, particularly in China, and supply constraints affecting the industry at the start of the year fell away.  Prices for recovered again in July as supply in China remained tight amidst environmental inspections at major producers and processing facilities.

In Q1 2017, several molybdenum mines in China closed down production for the Chinese New Year and Lantern festivals and suspended the restart of production because of lower prices.  These plants resumed production in Q2, alleviating the tight supply situation in China, though environmental inspections at large scale molybdenum mines and processing facilities in July disrupted production further.

Outside of China, strike action at a number of Cu-Mo mines in South America saw copper and molybdenum production impacted.  Freeport McMoran’s Cerro Verde mine in Peru experienced strikes in Q1 and a nationwide mining strike in Peru is likely to affect molybdenum mines operated by Antamina, Freeport, Southern Copper and MMG in Q3 2017.  In Chile, KGHM cancelled expansion plans at the Sierra Gorda mine in Chile, though molybdenum output was not planned to be increased.  Conversely, Anglo American announced an acceleration of expansion plans at the Quellaveco Cu-Mo mine in Peru.

Demand for molybdenum products has shown continued growth during H1 2017, driven by increased demand for stainless steel. Much of the demand growth for molybdenum products has been from increased purchases from the oil and gas industry, particularly in North America.  In 2017, stainless steel consumption is forecast to increase by 3.5% on 2016 levels which will underpin additional molybdenum demand.