Asia ferromolybdenum breaches $95/kg on strong demand as supply dwindles
HIGHLIGHTS
Asia Ferromolybdenum trades as high as $98.85/kg
Conversion facilities booked up until March: trader
Supply expect to remain tight in first quarter
Asian ferromolybdenum prices hit a new peak of $94-$96/kg, the highest level since Platts Asia weekly pricing began, jumping $19.75/kg, or 26%, on the week, amid heightened demand from China and continued market tightness arising from supply disruptions.
The S&P Global Commodity Insights Ferromolybdenum CIF Asia Weekly price moved up to a record $94/kg-$96/kg Feb. 2, from $75/kg-$75.25/kg Jan. 26.
Prices surged in the week to Feb. 2 as Chinese demand returned stronger than expected following the Lunar New Year holidays, market participants said, further constricting the already tight global ferromolybdenum complex driven by short covering in Europe. "The market expected China to return strong, but not at the levels we are seeing now. We were originally hopeful that China might export some ferromolybdenum out as prices in Europe are much higher but domestic demand returned stronger than expected with little room for export, " a North Asia trader said, adding that in the previous week ferromolybdenum was trading at a $10-$15 discount to Europe, but prices had quickly risen in Asia with little room for arbitrage.
Market participants largely expect demand in China to remain strong, with participants reporting over 10,000 mt of ferromolybdenum traded in the month of
January, higher than previously expected, with majority of the market away for one or two weeks for Lunar New Year.
"Returning on Saturday from the festive break, prices were originally driven by high EU prices but currently the surge is driven by domestic demand, which has taken us by surprise too," a Chinese trader said, adding that domestic prices had risen sharply over the week, with trades climbing from Yuan 298,000/mt ($44,298/mt) to well over Yuan 380,000/mt and with bids as high of Yuan 390,000/mt heard rejected.
In the week to Feb. 2, offers were heard to be in the range of $91-$100/kg, with most deals heard happening in the same range. This was still slightly lower than European prices with Platts, part of S&P Global Commodity Insights, assessing Ferromolybdenum 65% European in warehouse Rotterdam price at $102-$106.5/Kg on Feb. 1.
"Units are tight now, nobody wants to sell...as it will be hard to replace units sold with conversion capacities booked till March -- if you need units you have no choice but to pay up," an international trader said.
"The conversion premium is good now, and with such high prices we should by right see more supply in the market. However due to the lack of prompt conversion capabilities and low inventory levels with the majority of the traders destocking over the November-to-January period, there is a void of cheap offers in the market," another international trader said, echoing the view of a tight global supply complex.
Prices are expected to stay elevated with a confluence of market factors constricting supply flows for ferromolybdenum such as stronger-than-expected demand from the offshore sector and continued upstream molybdenum concentrates disruption in Chile and Peru, coupled with historically low inventory levels as prices hit an all-time high, market sources said. The Platts Daily Dealer molybdenum oxide assessment was $36.50/lb-$39/lb, with a midpoint of $37.75/lb Feb. 2., up from $36.50/lb-$37/lb Feb 1, data from S&P Global showed.
Market participants also reported further upside potential for molybdenum oxide prices as at current prices, the ferromolybdenum conversion premium remains well into double digits.
During Asian trading hours Feb. 2., there were reports of trades within the $38-$39/lb range, higher than the $36-$38/lb deals reported Feb 1.
Continued upstream disruptions
Molybdenum, typically a byproduct of copper mining, is also seeing the impact of unexpected disruptions in the copper mining sector in South America, on top of an expected structural deficit in 2023.
A fire at Chile's Ventanas port in December 2022 hit shipments of molybdenum-producing mines including Andina and Los Bronces, and there has been no confirmation on when operations will return to normal. Seasonal swells along the Chilean coast have also compounded worries on further shipment delays.
Meanwhile, protests in Peru following the ousting of former president Pedro Castillo have shown little signs of easing, forcing some mines to halt production, including Glencore's Antapaccay and MMG's Las Bambas. Concerns loom on whether the protests will spread to other regions and cause further disruption, leading to more volatility in the molybdenum market.
Source:
spglobal.com |