Iron-molybdenum prices have fallen steadily as China’s regional winter steel production is cut to protect the environment.
In contrast, the European molybdenum market was relatively unaffected. The main reason is that the molybdenum oxide market is in short supply. The Chinese government recently announced that it would implement a new environmental protection tax starting in 2019, replacing the country’s current environmental protection fees.
One of the provisions is to change the disposal of tailings violations of the penalty. Under the new system, Chinese miners will be fined 15 yuan per tonne of tailings if they do not deal with it properly, which will significantly affect the production costs and profits of small and medium-sized molybdenum mine operators, many of whom will be severely punished for dumping tailings off the site.
China’s molybdenum concentrate production is negligible. Lu Ming mining to strengthen the site tailings dam maintenance closed, so the total output further reduced. Lu Ming mining, the third largest domestic producer after Jincheng and Luo molybdenum group, was closed in October 2017. Even if the extraction is resumed, the utilization rate of capacity may not be high due to the low temperature during winter. Production setbacks and rising production costs have led many market operators to predict that molybdenum concentrate prices will tend to increase. CRU has heard that some miners are holding inventories in anticipation of higher prices ahead.
Recently, 45% of China’s molybdenum concentrate was traded at between 1, 350 and 1, 360 yuan per tonne. Prices are down 2% from mid-October.But because China’s ferromolybdenum market is weak, such high rates may not be sustainable. Instead, producers of molybdenum concentrate may be exposed to increased production costs. Iron molybdenum prices in China tend to fall due to weak steel demand in winter.
As indicated by the Chinese government, the northern provinces of Hebei, Tianjin, Henan, Shandong, and Shanxi will cut steel production from November 2017 to March 2018. To reduce pollution and reduce the smog affecting many residential areas, some large enterprises, such as the Tianjin steel pipe company and Hebei iron and steel group, have been forced to cut their alloy steel production by 30 percent. These policies have correspondingly led to cuts in the consumption of alloys, including molybdenum. The expected slowdown in market demand has also caused China’s ferromolybdenum prices to remain sluggish in recent months.
CHEMETAL USA is a leading molybdenum supplier and manufacturer in the worldwide.