High Costs and Stable Demand Drive Molybdenum Iron Prices to Remain High in August

SMM News, August 13:

Recently, with domestic major steel mills entering the bidding market, the molybdenum iron market has seen active transactions, with inquiries and trading volumes increasing significantly. The molybdenum iron market has long been constrained by high costs and poor industry profitability, resulting in low inventories. Against the backdrop of a recovery in demand, market prices have continued to rise driven by balanced supply-demand dynamics and cost support. As of today, SMM’s molybdenum iron price stands at 274,500 yuan/ton, up 17.6% from the beginning of the year. SMM's 45-50% molybdenum concentrate price is reported at 4,285 yuan/ton-degree, a 18.9% increase from the start of the year.

Molybdenum Concentrate Market

In August, the domestic molybdenum concentrate market showed a tightening trend. During the month, a mine in Henan Province underwent technical upgrading, affecting over 2,000 tons of monthly molybdenum concentrate output. Additionally, a mine in Inner Mongolia suspended production due to a sudden accident on July 23, with no confirmed restart date, impacting around 1,000 tons of monthly output. Coupled with safety inspections on non-coal mines in some regions, domestic molybdenum concentrate supply has become tight. Mines are holding back stocks and reluctant to sell, with only a few mines in Henan, Yunnan, and other regions conducting bidding sales during the month. On August 13, a mine in Jiangxi auctioned 228 tons of 45-50% molybdenum concentrate (with an average copper content of 2.597%), with the lowest bid reaching 4,300 yuan/ton-degree, pushing ore prices to new highs. Molybdenum iron enterprises remain cautious in restocking.

Molybdenum Iron Production Status

According to SMM data, domestic molybdenum iron output in July was approximately 17,120 tons, down 2.3% month-on-month but up 12.5% year-on-year, with an industry operating rate of about 58%, a 1-percentage-point decrease from the previous month. In August, the industry’s operating rate has continued to decline, mainly due to high costs for molybdenum iron plants, difficulties in raw material restocking, and steel bidding prices remaining below the cost line, which has dampened production willingness. Some enterprises have reduced production, and the industry operating rate is expected to drop to around 56% in August, leading to a contraction in molybdenum iron supply.

Molybdenum Iron Cost Dynamics

In July, the molybdenum iron industry operated with high costs. The average monthly price of 45% molybdenum concentrate in July was approximately 3,978 yuan/ton-degree. Factoring in other costs, the average total cost of 60% molybdenum iron in July was about 259,900 yuan/ton, while the average domestic molybdenum iron price that month was around 253,600 yuan/ton, resulting in a monthly loss of 6,300 yuan/ton for the industry. In early August, molybdenum concentrate prices remained high and stable, with tight market circulation. Iron plants were pessimistic about future demand and showed low enthusiasm for high-price restocking. However, as the price of molybdenum iron shifted upward, profitability improved slightly. Based on rough calculations using current molybdenum iron and concentrate prices, the total industry cost is approximately 276,000 yuan/ton, with a remaining loss of 1,500 yuan/ton.

Downstream Steel Mills

SMM data shows that domestic total output of 316 and 316L stainless steel reached 249,700 tons in July, up 7.8% month-on-month. Molybdenum iron procurement volumes via steel bids in July remained stable, with monthly bidding volumes (including long-term contracts) at approximately 13,000 tons, up [data pending] month-on-month. In July, the stainless steel market saw active shipments, significantly reducing inventory pressure and boosting production enthusiasm. Furthermore, as the traditional off-season nears its end, market expectations for demand recovery during the "Golden September and Silver October" peak season are optimistic. Supported by recent national policies to "curb excessive competition" and increased investment in large-scale infrastructure, stainless steel output is expected to rise steadily in August driven by policy benefits and positive demand expectations, supporting strong molybdenum iron demand. Although three domestic steel mills jointly announced a suspension of molybdenum iron procurement at the end of July, leading to a decline in early-month steel bidding volumes, both upstream molybdenum iron plants and downstream stainless steel mills have low inventories. After a period of market digestion, rigid demand has driven a concentrated rebound in recent molybdenum iron bidding volumes, and August procurement is expected to remain robust.

Comprehensive Outlook

In August, molybdenum concentrate supply remains tight due to reduced output from mines in Inner Mongolia, Henan, and other regions. On the demand side, molybdenum iron procurement via steel bids has exceeded expectations, with strong downstream demand. As the "Golden September and Silver October" peak season approaches, demand is expected to continue expanding. In the short term, molybdenum iron prices are likely to remain high and range-bound, supported by high costs and improving demand.