CRU Group says “the molybdenum industry is at a crossroads. The fact that a considerable amount of supply is produced as a byproduct means that the market now lies in a state of overcapacity, and while future demand looks strong, price stability lies in the hands of the major producers.  As a result, industry stakeholders are wondering whether the primary producers in China will manage supply to support prices, and what impact decision-making in China will have on the strategies of higher-cost producers in North America?

CRU has newly published volume one of its Molybdenum Market Outlook 2013 – Global Market Outlook. It says that “produced in conjunction with CRU’s offices in Beijing, London and Santiago this volume provides a truly global view of the molybdenum market for the next five years to ensure you gain the analysis you need to optimally plan your business strategy.

“This report provides you with our forward-looking view of global molybdenum supply/demand and prices. However what makes our analysis stand out from other sources of market intelligence is the fact that our findings are also reinforced by CRU’s robust multi-commodity mine cost analysis which has 100% volume coverage of production in China, allowing you to understand the production and cost structure in the crucial Chinese market.

Molybdenum production cost estimates in 2012 have been based on 41 operating mines. Including these individual operations and grouping small Chinese mines, CRU says it has achieved 100% coverage of world mine production.

“On a VBC basis, molybdenum mining costs exhibited significant variance from the top to the bottom of the curve. We estimated that the marginal producers were small Chinese primary mines. Using the traditional cash cost methodology, CRU estimates that the cash costs average on a pro rata basis was well below current price levels in 2012. When calculated on a net-of-byproduct basis, about 41% of production was effectively ‘free metal’ with negative cash costs.

With an increasing volume of production expected to come from copper operations in South America, the future cost structure of the industry is expected to significantly challenge high-cost primary producers.

This Global Market Outlook is volume one of two that comes with the Molybdenum Market Outlook 2013.  Published in September 2013, volume two is titled the China Market Outlook and provides a more detailed examination of the Chinese molybdenum market.