Jul. 01, 2024
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We will be monitoring these themes throughout the course of in our key publications, the Molybdenum Monitor and the Molybdenum Market Outlook.
Brent crude prices have recovered into the high-$50s /bbl due to planned production cuts by Saudi Arabia. However, inventory levels remain high and a significant drawdown is required to sustain a price recovery. Further gains will be required to boost drilling activity, and moly demand, in .
Copper miners prioritised operational activities in due to Covid-19, at the expense of maintenance, sustaining capex and stripping. This represents a key disruption risk to potential copper output &#; and therefore moly by-product output &#; in and beyond.
CRU expects several new projects to come online in . Moly prices will need to rise to ensure that this new supply comes online &#; both in terms of incentivising moly circuits at South American copper projects and securing financing at Chinese projects.
CRU currently expects moly mine supply to be largely flat y/y in . This is mostly attributed to a sharp drop in expected output at Rio Tinto&#;s Kennecott, due to a lower-grade portion of the orebody being mined. Lower grades at other key mines elsewhere will also weigh on production.
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China imported historically high levels of moly units through H2 , providing evidence of resilient domestic demand last year. A sustained appetite for imports in could tighten availability of material elsewhere, as reported in Europe in Q4 .
Moly demand in the US and Europe was hit particularly hard by Covid-19 and the oil price crash. We expect consumption in these regions to rebound in line with the macroeconomic recovery, albeit only to below levels. This will lend support to prices, particularly if spot supply is tight.
The shift towards higher-quality steels in China has boosted moly demand since H2 last year due to increased production of 316-grade stainless. However, it still remains unclear if this stainless is being consumed or stockpiled at present. Similar strength in will underpin prices.
While the automotive sector was hit hard by Covid-19, electric vehicle (EV) sales were significantly more resilient. We believe that increased EV uptake will be beneficial in the long term for moly demand, due to increased usage of high strength-to-weight ratio moly-bearing steels.
CRU expects the moly market to return to deficit (~4 Mlbs) in as stagnating mine supply lags rebounding demand. The speed and extent of demand recovery will ultimately determine the size of the deficit, but this will be in stark contrast to the large surplus (~30 Mlbs) in .
Oxide prices have breached $10 /lb at the start of the year due to a pickup in buying activity and expectations of a tighter market in . The Lunar New Year holiday in China may pare gains in the near term, but we expect average prices to trend towards double figures this year.
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