European ferro-molybdenum prices have soared in the past week as bids and offers snowballed on tight supply and high demand from traders needing to cover January contracts.
European ferro-molybdenum prices rose by just over 17pc on 6-13 December and were last assessed yesterday at $62-64/kg duty paid Rotterdam, up from $60-65/kg five days earlier. But the steepest increase occurred on 8 December when prices jumped to $60-65/kg from $52.50-55/kg in just two days.
Meanwhile, molybdenum oxide prices leapt to a fresh 14-year high of $27-27.40/lb duty unpaid Rotterdam on 13 December, up by just over 18pc from $22.50-23.50/lb a week earlier.
Multiple factors have underpinned the rapid price hikes, including a truckers' strike in South Korea and firm demand from steelmakers. But the main driver has been an urgent need by some traders to secure material to cover their long-term contracts for the new year, market participants said.
Argus heard only two transactions involving consumers over the past week, totalling less than 10t, with most deals done between traders. Steelmakers have mostly held back from purchasing the alloy as their needs are largely covered for January, market participants said.
But some of the traders expecting to supply those steelmakers in January were anxious to secure units in Europe as the truckers' strike in South Korea threatened to delay shipments. The strike action began on 24 November and ended on 9 December, but overall had little impact on shipments of molybdenum products into Europe, market participants told Argus. That said, the possibility of supply disruption was enough to push traders to bid for material in Europe and set off a snowball effect as offers continued to rise with every deal concluded. "When you hear a bid, you raise your offer above it because no one wants to sell low, and it just keeps going," a trader explained.
But this is not the first time that tighter supply has driven European molybdenum prices higher this year, and prices have been steadily trending upwards since sinking to an 18-month low of $34-34.50/kg in August.
Market participants had expected demand from steelmakers to be curbed by high energy prices in the winter, which led some traders to run down their stocks on the expectation that there would be fewer buyers active in the spot market. But instead, demand for the alloy was firmer than many had expected, and this led to much tighter supply towards the end of the year.
In August, the TTF day ahead natural gas contract rose to a record high of €308/MWh from just €45.28/MWh a year earlier. Since then, measures put in place by the European Union, including an agreement to cut gas consumption by an average of 15pc, have pulled gas prices lower. The TTF day-ahead contract was last assessed on 13 December at €138.85/MWh compared with €137.28/MWh a day earlier and the first-quarter contract has been trading at a similar level at €138.09/MWh. These prices are still far higher than the TTF day-ahead contract 10-year average of €31.09/MWh, but they are not so high that European steel mills have had to shutter completely as many molybdenum market participants had expected.
Rally slows but prices remain firm
Spot trade has already started to slow in Europe, leading some market participants to speculate that prices have hit their peak, but future price direction is currently uncertain and so far prices are holding firm.
Molybdenum oxide prices in South Korea softened slightly on 14 December, dropping to $26.90-27.30/lb in-warehouse Busan, down from $27-27.40/lb a day earlier, at least in part because of slower buying interest from international buyers.
And most market participants expect a similar reaction in Europe. Market participants expect liquidity to slow as traders step back to absorb the recent price rally and take time for the end of year holidays. As a result, traders anticipate that offers will fall in the near term, but it is unclear how big the price decline will be and how long it will be sustained.
But looking ahead to next year, there is still room for prices to rise further or at least maintain their current level, market participants said. This week traders have offered full truckloads of ferro-molybdenum at $63.50/kg duty paid for January release, indicating that some still expect prices to be at a similar level in January.
And the underlying supply tightness that underpinned the initial price rally is likely to persist.
So far this month, Chinese steelmakers have bought 5,500-6,000t of molybdenum compared with just 4,000t around the same time last month, indicating that December could be a particularly strong purchasing month for China. Higher Chinese consumption could further tighten availability of material in South Korea, lending support to higher prices.
