Being the element with the sixth-highest melting point, Molybdenum is mostly used in making many types of steel alloys. Such high melting point means that the metal readily forms hard, stable carbides in alloys. This tells us that molybdenum is an important industrial metal. And it means that the metal is susceptible to just about any factor that affects the price of other industrial metals. Below are those factors – and how they affect the price of the metal.
This is quite the top factors that move the price of molybdenum. In mid 2011, Moly Investing News reported that molybdenum prices were falling because of weak demands. During that period, the price of the commodity fell to the lowest price in a year.
When talking about the demand outlook, you want to look at the industries that are dependent on molybdenum. The stainless steel industry is a place you want to look. For instance, in the Moly Investing News that was referenced above, it was stated that weak consumer demand for stainless steel, which prompted a number of stainless steel producers to cut capacity at their plants, contributed to the downward trend of the metal at that.
In general, when the demand outlook from the industries that make use of molybdenum is negative, you can expect that prices would fall in the near term. The keyword here is ‘outlook.’ In essence, it means that predictions of what future demand might look like can affect the price of the metal. The only thing here is that the effect is usually on the short-term, and it does not bear weight like the actual demand data. The short-term movement is usually instigated by initial actions taken by traders to profit from the ‘impending’ demand data.
Behind demands, supply is the second biggest mover of molybdenum prices. I say that because the demand outlook of the metal is what determines how much effect the supply outlook would have on prices. For instance, if the analysts predict that there will be a surge in the supply of molybdenum, there would normally be a drop in the price of the metal. However, if such supply outlook is met by a weak demand outlook, the effect automagically becomes bigger, as the price decline would be greater.
Consider this as reference. The Moly Investing News reported that was referenced above also stated that an increase in production of molybdenum during that period also contributed to the decline in the price of molybdenum. In such case, it means that there would be a surplus of the metal in the market.
Here, you want to look at top molybdenum producing nations. China, US, Chile, Peru and Mexico are the top producing nations, with China being the highest and Mexico the least on list.
As with most industrial metals, the state of the economy affects the price of molybdenum. Moly investing News, in the same report, went on to admit that the overall bearish macroeconomic cues also affected the price of the metal. Drawing from the last statement, it is easy to see that negative economic outlooks affect the price of molybdenum adversely.
Resource Investor published a piece titled, “Molybdenum Pricing: Recycling Becomes a Key Factor” in 2006 that covers this factor. Analysts are not talking about this factor at the moment. However, this factor could become very important in the future. Here is why. First, molybdenum is relatively a rare metal. It is the 54th most abundant element. Second, molybdenum does not occur naturally as a free metal. These two factors all point to the fact there might be supply problems in future. So it means that the dependence on recycling for molybdenum production would grow in future. In most situations, positive recycling outlooks would send prices lower, as it adds another source of molybdenum.
Since molybdenum is highly used in the steel industry, its price is susceptible to seasonal variation in the steel industry. The steel industry usually slows down during the summer. This means that the demand for the metal is usually low during summers, and hence prices.
The Moly Investing New report also said, “The weak prices are also being pushed down by seasonal factors as the summer slowdown in steel production continues to affect demand.” As a matter of fact, this factor can be seen in action at present (summer of 2014). As the price chart above shows, the price of the metal has been declining since the start of the summer. Therefore, with this being the trend for years, molybdenum traders want to be cautious of this factor.
While China is the world’s biggest producer of molybdenum, demands from this country has also moved the price of the metal in the past. Reuters reported on July 24, 2014 that China is buying more molybdenum. Such data means that stockpiles are dropping. Historically, such events send prices higher.
On a last note, traders should be aware that the molybdenum market is highly volatile. Price could rise or drop by thousands over a few days. Therefore, a thorough understanding of the factors that affect the price of the commodity is important. In addition, as seen with in this article, several factors could contribute to the price movement of the metal at the same time. Usually, the more the factors contributing towards a trend, the higher the resulting effect would be. Perhaps that is why the price swings are usually so enormous.