London, May 20th (Argus) - Driven by a structurally tight molybdenum ore market and increased demand from Chinese steel industry, the price of European molybdenum ferroalloy has climbed to a three-year high this week.
Argus' latest assessment of molybdenum iron prices was on May 19th. The molybdenum iron price delivered at the Rotterdam warehouse was $70.90 - $71.50 per kilogram, having risen by a quarter compared to the beginning of the year. The untaxed Rotterdam oxide molybdenum price also rose to $30.50 - $30.80 per pound, an increase of 28% compared to the beginning of the year.
The price increase is due to the tightening supply of molybdenum concentrate. Molybdenum concentrate is the raw material for producing molybdenum oxide, and molybdenum oxide is used in the production of molybdenum iron. Since January, the price of concentrate in China has risen by approximately 29%.
Market participants stated that the increased downstream demand from Chinese steel manufacturers has exacerbated the supply shortage, as steel mills purchased approximately 30,000 tons of molybdenum iron from March to April, representing a 10% year-on-year increase. This surge in demand has absorbed a large amount of spot concentrate and oxide supplies in China, restricting exports to other consumer regions. Initially, market participants expected that the increase in pre-holiday inventories before the May 1st to 5th National Day holiday would dampen the spot demand in early May, but the sustained demand prompted steel mills to continue purchasing.
In fact, the market began to prepare for a rebound earlier this year. On January 29th, an explosion occurred at the Langeloth production plant of Centerra Gold in the United States, causing the plant to suspend operations and cutting off an important source of oxide and molybdenum iron supply in the market. This facility had a very small direct contribution to global supply, but the power outage significantly tightened the supply in the nearby area and strengthened the bullish sentiment. Therefore, traders and producers expected that the spot supply would become tighter, significantly raising the price levels.
The logistics restrictions among trading companies further exacerbated the rebound. Market participants stated that financing, transportation, and inventory bottlenecks reduced the available materials in the spot market, which accelerated the price increase beyond the reasonable level of basic consumption. Some sellers also refused to provide materials due to expectations of further price hikes, while buyers refused to accept higher quotations, leading to a decline in spot liquidity and an intensification of price fluctuations.
Market participants stated that buyers have only made a few inquiries for complete vehicles in recent weeks, indicating that the market is still more constrained by supply rather than supported by strong end-user consumption. Therefore, many market participants believe that the current increase in molybdenum iron prices is mainly driven by supply. The impact of logistics disruptions, tight supply of concentrate, and cautious seller behavior is greater than any substantive recovery in European steel demand.
