London 28/07/2016 - The noble alloys markets - molybdenum and vanadium - continued to consolidate this week, having stepped back after substantial price advances in the first half of 2016
But there is underlying resilience and the outlook remains positive, traders said. There reasonable business taking place for the time of year, both inter-trade and with mill end-users.
"It is the summer, after all, so it is not a surprise that the price has come back a bit - and some of the rise was a bit heated. The third quarter is a little way off but the market is in better shape now compared with the turn of the year," a trader said.
Molybdenum oxide (MO3) edged up slightly this week and was quoted at $6.70/7.00 per pound, having settled back from early-June peaks of $8.75, which was its highest since January 2015. The market had fallen as low as $4.50 per pound in December 2015, the weakest since 2001.
Ferro-molybdenum (FEMO) was at $16.50/17.25 a kilo, having peaked at $19.25 in June, recovering from the December 14-year low of $12.50.
"We are picking up now - China led the way down [recent retracement] and is leading the way back up," another trader said.
China is the biggest end-user of MO3 although its demand profile fluctuates regularly and, since much of the global steel mill industry operates on a hand-to-mouth basis and traders only hold small stocks, a modest pick-up in off-take or enquiries will quickly feed through into prices.
And the changing supply/demand picture that emerged early this year likewise contributed to the market's strong recovery, traders noted.
Molybdenum supply is a mix of primary production and by-product availability from copper output.
Molybdenum production and consumption both declined in the first three months of this year but the steeper fall in output moved the supply/demand balance into deficit, the most recent figures issued by International Molybdenum Association (IMOA) show.
Global production dropped to 117.8 million pounds in the first quarter, down five percent from the final quarter of last year. Consumption also fell to 121.2 million pounds, down two percent from 123.7 million pounds in the previous quarter.
Traders said the 2016 trend for vanadium has matched molybdenum, with a sharp price increase to the end of the first half before a re-adjustment and consolidation.
Ferro-vanadium is currently indicated at $18.00/18.50 per kilo, just below June's 11-month highs of $19.00. At the start of the year, prices were struggling around $13.75, the weakest since 2004.
LME MOLYBDENUM CONTRACT BECOMING IRRELEVANT
Meanwhile, the LME molybdenum contract - MO3 - remains detached. It has not seen any boost from the free-market trend - business has been patchy this year.
LME MO3 last traded at the end of June when 12 lots were transacted, while market open interest is now down to just two lots on the August prompt date.
Open interest has never been particularly large - even in mid-2010, when the market was developing following its February launch, levels were only in the mid-30s.
Warehouse stocks are down to 78 tonnes, the lowest since October 2014 and not far off the 54 lots of April 2010 that represented the first deliveries. The all-time high for inventories was 348 tonnes reached in December 2013.
The LME cash price is currently $15,000/15,500 - equal to $6.80/7.00 per pound. The lifetime price peak for the LME contract was set in March 2010 at $41,990.
(Editing by Mark Shaw)