What do skyrocketing Molybdenum prices mean for Stainless steel?

Economy
Written By Hermanto Hermanto

By Katherine Grace

The price of Molybdenum (Moly) has skyrocketed in early 2023 - but what does this mean for the Stainless steel industry, and for Stirlings?

It’s an important alloy component in Stirlings’ stocked grades 316, 2205, 2507 & 904L Stainless.

Have a read about what Moly is, its pricing trends and the industries it is used in.

Molybdenum and Stainless steel

Molybdenum is a lightweight, robust, and extremely resilient metal with good corrosion resistance and a low coefficient of thermal expansion. It’s refractory, used mostly in high-temperature applications, and many grades of Stainless steel containing Moly are more corrosion resistant than Moly-free grades. About 80% of the Moly that is mined each year is used to make Stainless steel, and it is often produced as a byproduct of porphyry Copper mines.

The following grades of Stainless steel and Performance metals, known for their superior corrosion resistance, contain Molybdenum:

  • Grade 316 Austenitic Stainless steel;

  • Grades 2205 & 2507 Duplex Stainless steel;

  • Grade 904L ‘6 Mo’ Austenitic Stainless steel;

  • Several specialised Nickel alloys.

Price trends

The high price of Moly in February 2023 (US$90/kg, US$90,000/tonne - a record high) is a key factor that will influence potential Stainless steel pricing and thus manufacturing in a range of industries over the coming year.

During Q1 of 2021, the market was impacted by fresh COVID-19 measures in China, the metal's top producer and consumer. Molybdenum prices also stagnated due to a slowdown in Chinese steel production as the country curbed output to reduce emissions. The price of Moly started in 2022 at US$44.90/kg, dropping to a low of US$35.50/kg in August 2022. 

However, the price shot up to US$73.50/kg in January of this year, before reaching $90/kg in February. US BMO Capital Markets points out Moly has been one of the strongest base metal performers in the recent past with the latest spot assessments.

While there are some stocks of Molybdenum oxide and Ferro-molybdenum in Europe, inventories in European warehouses remain critically low. The supply shortage emerged in 2022 with consumers reporting less material available from China.

“Global Molybdenum consumption is expected to continue increasing over the next decade as demand for Molybdenum-containing steels grows. But production has been squeezed by lower Molybdenum content in mined ores seams and a lack of new Molybdenum projects to meet demand,” according to Argus analysis.

So, which industries do we see this increase in demand coming from, driving this supply squeeze? Let’s explore the industries that employ Molyb in their production and manufacturing and for what purpose.

Pharmaceutical, Chemical, Food & Beverage

The usage of Moly in Stainless steel alloys for pharmaceutical and chemical mills is helping to drive market growth, as Moly-containing Stainless steels tend to have superior corrosion resistance in harsh chemical environments. The rising demand for Stainless steel to manufacture service pipes, which may address the worldwide problem of water leakage, is also propelling the market forward.

Moly-containing Stainless steel for use in the food and beverage industry is also boosting market growth. As with the Pharma and Chemical industries, corrosion resistance is key. The general inertness of Stainless steel makes it ideal for food contact, meaning there is no measurable chemical reaction between the Stainless steel and the food keeping the metal pristine and the food untainted by metallic constituents or corrosion products. Grade 316 Stainless steel with a 2% Moly content is resistant to high levels of chloride or sulphur dioxide, making it suitable for the storage of white wines, salty foods and the pectin used in jam-making. Super-austenitic Stainless steel is required for soy sauce manufacturing, and Moly-containing Duplex Stainless steel is needed for mustard and vinegar-making, cheese dairies and fish-canning plants.

In addition to steel alloys, many fertilisers contain the element for plant nutrition, and some Moly compounds are used to produce high-temperature lubricants.

Oil & Gas, Energy

Traditionally, the Moly market is strongly influenced by what happens in the Oil & Gas sector, as it utilises high-content Moly steel for pipelines.

North America had the second-largest market share of 21.10 percent in 2021, behind the APAC nations. Growing demand for Moly from the oil and gas sector is likely to drive growth. Rising energy demand from large-scale enterprises is also likely to impact Moly demand. In addition to this, Moly serves as a catalyst in refining petroleum products.

Aerospace & Defence

The Aerospace and Defence industry is likely to maintain its decade-long trend of faster-than-average growth. Due to rising buying power, this industry has been expanding internationally, with developing markets growing at a faster rate.

Moly is employed in the Defence sector to make top-of-the-line warheads, nozzles, tankers, and shaped charge liners. The return of global security concerns has resulted in increased military spending in the United States, as well as in other countries such as Russia, France, China, among others. Overall, the Aerospace & Defence industry's consistent growth rate, as well as an increase in Moly applications in the segment, are expected to present a major potential for the Moly market to grow.

Green

APAC nations (particularly China, India and Korea) are seeing rapid progress and rising demand for Molybdenum due to activities aimed at creating green and efficient specialty steel for their respective green transitions.

Moly and Copper are used in more than eight clean energy generation and storage technologies, including solar cells, and a critical mineral required for a range of low-carbon technologies, especially wind and geothermal. According to a World Bank report, the greatest share of demand for Moly from electricity generation and energy storage technologies comes from wind (47.3%) and geothermal (41.7%).

What does this mean for pricing?

With short supply and a high and continually rising demand from a range of industries, the price of Molybdenum will likely rely on an increase in supply to stabilise to pre-2023 levels. Around 20% of the Moly used each year comes from recycling. Moly scrap, therefore, plays an important part in meeting demand and contributing to sustainability. According to research, for a sustainable extraction rate, Moly recycling must be increased to at least about 80% in the future. 

As you can see, Moly is a valuable and vital addition to increased-corrosion resistance in Stainless steel for a number of applications. Through a combination of mining and recycling, producers should become more responsive to this increased demand and ensure adequate and sustainable supply for many years to come.

We at Stirlings will keep our customers informed of any changes to our pricing due to changes in the market - keep informed by subscribing to our monthly news update and social media pages.

Hermanto Hermanto
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