Molybdenum Global Growth Holds as China Hardens Grip on Tungsten, Tin and Antimony

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Researched by Industrial Info Resources (Sugar Land, Texas). The owner of the largest molybdenum deposits in the world, China’s state-owned Luoyang Luanchuan Molybdenum Group (LLMG), is planning to raise up to $800 million in an initial public offering (IPO) in Hong Kong in February. The country’s largest producer of the metal, Jinduicheng Molybdenum Group (JMG) (Xi’an, China), is planning a $1 billion IPO in Hong Kong later in the year.

LLMG, which claims to have reserves containing 2.06 million tons of the metal, has contracted to supply the world’s No. 4 steelmaker, POSCO (South Korea), with 9,000 tons of the metal over the next two years, which will earn revenues of $300 million.

China is the third largest molybdenum producer in the world after the U.S. - 32%, Chile – 26% and China – 20%. These three countries plus Peru and Canada produced 91% of the total world production in 2005. Production of mined molybdenum rose from 140,000 tons in 2002 to 180,000 tons in 2005, with a spurt in output of 16% in 2004. Currently, the metal has been trading around $26/lb after hitting a peak of $36/lb in June 2005. The fall in price has occurred at a time when the Chinese authorities are looking at the limitation of exports by imposing a quota to protect against the depletion of natural resources.

Chile’s state copper commission Cochilco estimates that the metal’s output will grow around 2% in 2007 to 189,009 tons with prices averaging $20/lb. This price level is well above historical prices, which have been in the $2 to $5 range.

In 2005, stainless steel consumed 28% of demand, full alloy steel 15%, tool and high-speed steel 10%, high strength low alloy steel 9%, and carbon steel 9%. Demand in the use of the metal in catalytic applications is estimated to grow at a rate of 5% per annum through 2010. Catalytic applications currently account for 8% of consumption. Tighter emissions standards and auto fuel economies are pushing the increased use of catalysts. Spent catalysts can be regenerated for reuse and recycled for recovery of secondary molybdenum. Continuing demand for molybdenum hardened steel will hold in 2007, with heavy demand for steel tubing in the oil and gas industry bolstering the demand.

China, in another move to protect its domestic metals resources, now requires tungsten, tin and antimony smelters to have at least half of their project investment self-funded rather than using other channels and bank loans. They will also be subject to environmental and energy standards, says the powerful National Development and Reform Commission (NDRC). Under the new rules smelter are not allowed to build or add capacity if they cannot secure feedstock supplies. For approval, new tin projects must have a minimum annual production capacity of 8,000 tons and antimony projects a minimum of 5,000 tons. Location and waste controls are also being imposed.

China is the world’s largest producer of these three metals. Tungsten is used in the metalworking, construction, and electrical machinery and equipment sectors. Antimony is used as a hardening alloy for lead, with a major application in batteries. Tin is used as a protective coat for other metals to prevent corrosion in soldering electronic components.

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