2017 PREVIEW: Year-end moly buying spells strong start to 2017 in Europe

Molybdic oxide and ferro-molybdenum market participants in Europe are optimistic for a solid start to 2017, forecasting steady or slightly firmer prices in the first quarter.

Buoyed by a strong end to 2016, market players are anticipating an active January, with European prices expected to receive a boost from strong buying interest in Asia, ahead of Chinese New Year at the end of January.

“People have been buying for January at low prices now in order to strengthen their margins, [as prices are expected to increase],” a trader told Metal Bulletin in late December.

“All options [for increased volumes] are being snapped up,” a producer added.

Buying interest remained firm into December, and despite tailing off ahead of the Christmas and New Year break in Europe, demand has proved sufficient to support prices, which avoided a year-end slump from destocking.

“There’s fairly thin trading [in December], and some hope for cheaper prices, but really you can’t wait to jump in,” a second trader said.

“I’m pleasantly surprised by how well things are holding up. A year ago, I could have gone to sleep already and that’s certainly not the case now,” the producer said of the market at the end of 2016.

The situation is in stark contrast to that seen a year ago. 

Molybdic oxide prices started 2016 at $5.15-5.30 per lb, in warehouse Rotterdam, after a confluence of oversupply, weak demand, cheap Chinese offers, and negative sentiment pushed prices to twelve-year lows in late 2015.

Metal Bulletin’s prices ended 2016 at $6.60-6.80 per lb, marking an increase of 28% over the course of the year. 

“Notice how prices haven’t collapsed. It’s not like it was; nobody is looking to dump their material,” the second trader said.

Similarly, ferro-molybdenum prices are up 25% from a year ago, reaching $16.70-17.40 per kg, in warehouse Rotterdam, on Friday December 30. 

But with ferro-molybdenum prices lagging slightly behind, and after enduring heavy losses in the past, some sellers are reluctant to carry out conversions of molybdic oxide to ferro-molybdenum, pointing to a tighter market in the new year, sources said.

“Traders will continue to convert, but maybe not in such high volumes as some lost money this year,” a third trader said.

The slightly tighter market means producers have been able to command slightly tighter discounts in long-term contracts settled against benchmark prices, sources said.

Meanwhile, a tighter market and modestly higher prices on the horizon mean some buyers are locking in their needs early, but paying a premium for usually-discounted forward delivery.

One seller reported the forward sale of a few truckloads of ferro-molybdenum with a price of $17.45 per kg, for February delivery in Europe.

At the time, the spot material for prompt delivery was trading at $16.80-17.20 per kg in Europe.

“Every time there’s a forward sale it’s expected that it will be backwardated,” a fifth trader said.

“Buyers would rather not go short; prices are going to go up and everybody knows it. But at the same time, people want to get rid of material now, rather than finance their stocks until the new year,” the seller added.