Moly scrap flows to traders amid low consumer demand

US molybdenum processors have increasingly turned to making sales to traders at lower prices for vacuum-grade scrap because of mounting pressure to generate cash amid low consumer demand.

Low consumer demand in recent months followed a spike in molybdenum scrap prices earlier in the year and left processors with high-cost inventory and fewer places to sell.

Molybdenum metal offers from China also put downward pressure on offers of vacuum-grade molybdenum scrap in the US because traders could restock metal and compete more effectively on limited spot inquiries.

Vacuum-grade molybdenum scrap and metal prices climbed towards the $20/lb mark in February as the Covid-19 outbreak in China caused concern about the metal supply chain.

Consumers, processors and traders rushed to restock inventory for both scrap and metal. Both prices have declined in the following months as logistical concerns eased in China and the Covid-19 outbreak and ensuing recession in the US hampered consumer production capacity.

In the months of April and May, processors held back offering scrap in the spot market to mitigate losses on volumes purchased in the months of February and March.

The steepest price decline occurred in April, when an international supply squeeze forced US capacity cutbacks, drying up domestic demand. Processors began offering to traders when it became apparent that consumer demand would not bounce back as quickly as anticipated.

Scrap transactions have largely occurred among traders looking to take positions, while processors focus on generating cash.

The dynamic switched from processors competing with domestic traders for consumer business to processors competing with international traders for sales to domestic traders.

The monthly Argus assessment for vacuum-grade scrap delivered to a consumer fell to $13.75-14.50/lb on 30 June from $14.25-15.25/lb the month prior, but consumer sales have fallen as low as $13.25/lb since and some processor-to-trader transactions have dipped below the $13/lb mark.

Market participants said the market is flush with metal and the outlook for the US scrap supply remains uncertain as processors work down inventory yet express reluctance to restock. Molybdenum metal may dominate the market for the foreseeable future before vacuum-grade scrap return as a viable, cost-effective alternative.

By Nicholas Bell