Why is Molybdenum Valuable?
Molybdenum is a solid, shiny, silvery metallic element that is ductile and malleable. It does not occur naturally as a free metal, but usually in an ore known as molybdenite.
Molybdenum has a very high melting point, which enables it to form strong, stable carbon compounds in alloys such as steel. As a result, it is an important industrial element.
Until the late 18th century, scientists believed that molybdenite was either graphite or a lead ore. In 1778, Swedish chemist Carl Wilhelm Scheele analyzed the ore and proved it was neither of these substances. In 1781, his colleague Peter Jacob Hjelm performed additional experiments on molybdenite and eventually isolated a newly discovered element, molybdenum.
Mines worldwide extract more than 225 thousand tons of molybdenum annually. In addition, a significant amount of the element is recovered each year from recycling scrap steel. The vital role that molybdenum plays in aircraft, nuclear power and other industries ensures that the commodity will remain an important one on the world stage.
How is Molybdenum Produced?
There are two methods for producing molybdenum: primary production (mining) and secondary production (recycling). Mining provides most of the supply, although the United States Geological Survey (USGS) estimates the quantity recovered from recycling may be as much as 30% of the total supply.
Although many minerals contain molybdenum, only molybdenite contains enough of the element to make commercial production viable. Molybdenite can either occur alone in an ore body or alongside sulfide minerals of other metals, mainly copper. A typical viable ore body of molybdenite might contain between 0.01 and 0.25% molybdenum.
Molybdenum mines fall into three categories:
Primary mines: recovering molybdenum is the only objective
By-product mines: copper-bearing ore recovery is the principal objective, although molybdenum recovery provides added economic value
Co-product mines: the commercial viability of the mine depends on extracting both copper and molybdenum.
Depending on where the ores reside, miners use one of two techniques to extract molybdenite ores from the ground. In open cast pit technology, miners excavate close to the surface and extract the ore bodies.
If the ore bodies reside deep beneath the surface, miners employ the underground block caving technique. This method involves undercutting and collapsing large blocks of ore, which are then transported to the surface for recovery.
Processing the recovered ores occurs in five main steps:
- Ferromolybdenum Smelting
- Molybdenum Metal Production
Ball or rod mills crush and grind the ores into very fine powder. This process facilitates the next step – the separation of valuable molybdenite from worthless rock particles found in the ores.
The fine powder is mixed with water and aerated in flotation tanks. The less dense molybdenite ore floats to the top, while the dense worthless rock sinks to the bottom. If the recovered ores contain copper, flotation tanks can separate molybdenite from copper sulfide.
The remaining product is molybdenum disulfide and is between 85 and 92% pure. Further treatment can dissolve the remaining copper, lead or other contaminants and produce even purer molybdenum disulfide.
Furnaces roast the molybdenum disulfide at a temperature of between 900 and 1200 degrees Fahrenheit. The resulting cooked product is molybdenite concentrate and contains at least 57% molybdenum and less than 0.1% sulfur. * (By-products of the roasting process may include rhenium. Molybdenum roasting is one of the main sources of this rare metal.)
Between 30 and 40% of molybdenite concentrate is used to produce ferromolybdenum, a compound of iron and molybdenum.
Upgrading: Chemists combine about 25% of molybdenite concentrate with ammonium or sodium hydroxide to produce various chemicals.
Molybdenum Metal Production
The final stage involves heating molybdenum concentrate in furnaces to extract molybdenum. First, molybdenum dioxide is produced at temperatures of between 850 and 1200 degrees Fahrenheit. Second, molybdenum dioxide is converted into the metal molybdenum. This occurs at temperatures of between 1,800 and 2,000 degrees Fahrenheit.
Catalysts, ferrous scrap and super-alloy scrap provide the main sources of recycled molybdenum. New scrap comes from steel mill customers, while old scrap comes from molybdenum alloys that are discarded after serving their useful life.
There is no process for separate refining and processing of secondary molybdenum from its alloys. Rather, recyclers recover steel and other alloys that often contain significant amounts of molybdenum and, therefore, are useful for many applications.
China is by far the leading country for molybdenum mine production.
It accounts for more than 40% of global production, which is almost twice as much as the next largest producer, Chile.
Top 10 Molybdenum Mining Countries
|Rank||Flag||Country||World Mine Production (Thousand Metric Tons)|
Which Countries Have the Most Molybdenum
|Rank||Flag||Country||Thousands of Metric Tons|
Molybdenum is ductile, malleable and has a high melting point. It is also corrosion-resistant and strong, which makes it ideal for use in steel-alloys.
5 Main Uses of Molybdenum
|Alloying agent||When added to steel in concentrations between 0.25 and 8%, molybdenum produces ultra-strong steel with resistance to corrosion and wear. “Moly steel” alloys can absorb pressures of up to 300,000 pounds per square inch. Many products contain alloys made with molybdenum:|
|1. Missile and aircraft parts|
2. Nuclear reactor condenser tubes
4. Heating elements
6. Saw blades
|Petroleum production||Molybdenum serves as a catalyst in refining petroleum products.|
|Electronics and electrical||Filament materials in electronics and electrical products contain molybdenum.|
|Fertilizers||Plants require trace amounts of molybdenum for nutrition, and many fertilizers contain the element.|
|Lubricants||Some molybdenum compounds are used to produce high-temperature lubricants.|
What Drives the Price of Molybdenum?
The price of molybdenum is driven mostly by these five factors:
- Chinese Supply and Demand
- Global Stocks
- Demand Outlook
- Input Prices
Chinese Supply and Demand
China supplies over 40% of the annual production of molybdenum. However, China also uses more than 30% of the annual global mined supply of the commodity.
Strong Chinese GDP over the past two decades had pushed many industrial commodity prices higher. However, China’s economy has slowed in recent years. At the same time, policymakers have placed new emphasis on curbing pollution-producing industries such as mining.
Several important catalysts for molybdenum prices could occur in China. If the nation puts stricter curbs on molybdenum production, then supplies could become constrained and prices would likely rise.
Similarly, China will almost certainly play an important role on the demand side of the equation. If industrialization and urbanization expand in the country, demand for engineering steels will pick up again, and this should lift molybdenum prices.
Traders should pay careful attention to Chinese molybdenum inventories and economic growth for clues about the direction of prices.
The London Metals Exchange (LME) keeps track of global molybdenum stock levels, and traders follow these statistics closely.
Movement in these stock levels could be a harbinger of supply shortages or gluts. Drops in global stocks often accompany price increases, while increases in stocks often signal an oversupply and lower prices.
Overall economic activity, particularly in the industrial sector, affects demand for molybdenum.
The largest sector that consumes molybdenum is engineering steel. The quantity of strong steel required for big engineering projects such as bridges, railways and airports is bigger than any other applications.
The United States has not invested in major infrastructure projects in decades. Should such infrastructure investments come to fruition, the price of molybdenum could move significantly higher. Similarly, as other developed economies replace their infrastructure, molybdenum prices could rise.
The steel industry is highly susceptible to seasonal variations in demand. During the summer months, demand for steel usually declines, and, as a result, molybdenum demand is also weak.
Molybdenum is a rare element, and it doesn’t occur naturally on its own. Producing it requires large amounts of energy including coal, electricity and crude oil.
Mines and blast furnaces utilize energy to extract molybdenite from the ground and process it into molybdenum. These costs can have a big effect on primary production. Similarly, the costs of scrap metal can impact the price of secondary production.
3 Reasons You Might Invest in Molybdenum
Investors should consider buying molybdenum for the following reasons:
- Bet on Strong Steel Demand
- Inflation and Weak US Dollar Hedge
- Portfolio Diversification
Bet on Strong Steel Demand
Expanding global demand for strong steel products should manifest itself in many sectors of the global economy.
China: The country continues to urbanize and industrialize its economy. Buildings, engineering projects and power plants are some of the many projects that require very strong steel alloys. Molybdenum is certain to play a role in producing these alloys.
The United States: The United States is expected to embark on major infrastructure projects over the next several years. Bridges, railways, airports and other projects require major upgrades. All of these projects will require significant quantities of strong steel and, therefore, molybdenum.
Inflation and Weak US Dollar Hedge
Investing in molybdenum is a way to bet on a weak US dollar and higher inflation.
Molybdenum is priced in US dollars, so the performance of the American economy can impact its price. The US Federal Reserve Bank has kept interest rates low and the US dollar weak for many years.
US central bankers are likely to continue these policies to support consumer borrowing and spending. These conditions are likely to be very beneficial for all commodity prices including molybdenum.
A weak dollar could stoke inflation concerns.
There is a limited supply of molybdenum, and producing it is an energy-intensive endeavor. The price of the commodity would likely benefit from fears of inflation.
Most traders have the vast majority of their assets in stocks and bonds. Commodities such as molybdenum provide traders with a way to diversify and reduce the overall risk of their portfolios.
Should I Invest in Molybdenum?
Traders who want to invest in molybdenum should consider purchasing the commodity along with a basket of other commodities that includes base metals (i.e., copper, nickel, lead and zinc), precious metals, agricultural commodities (i.e., dairy, meats and grains) and energy.
Purchasing a basket of commodities helps protect traders from the volatility of any individual commodity. It also adds overall diversification to a stock and bond portfolio.
There are two specific trends that could raise molybdenum prices in the years ahead:
- Chinese Demand
- Infrastructure Demand
China is the top consumer of molybdenum and is likely to increase its consumption in the years ahead. Industrialization and urban sprawl in China should fuel demand for strong steel alloys. Essentially, investing in molybdenum is a bet on a resurging Chinese economy.
Construction and infrastructure could represent a very large percentage of future molybdenum demand. The United States is planning large-scale infrastructure projects to replace dilapidated bridges, airports and transportation systems. Most of these projects will require strong steel alloys made from molybdenum.
However, traders should also consider the risks of investing in molybdenum:
A global recession could weaken Chinese demand and put infrastructure plans on hold.
Overproduction of the metal or increased stockpiling by China could create a supply overhang on the market and send prices lower.
Global economic or political turmoil could strengthen the US dollar and weaken demand for commodities.
Expert Opinions on Molybdenum
One leading consulting group that covers the metals sector sees a slow, steady recovery for molybdenum prices in the months ahead. It cites a pickup in the stainless steel and energy sectors as reasons for optimism about prices:
“Demand for molybdenum products has shown continued growth …driven by increased demand for stainless steel. Much of the demand growth for molybdenum products has been from increased purchases from the oil and gas industry, particularly in North America. “
Roskill, Market Reports, Briefings and Consulting Services for the Metal, Mineral, Carbon and Chemical Industry.
How Can I Invest in Molybdenum?
Investors have a limited number of options for gaining exposure to molybdenum prices:
Molybdenum-Trading and Investing Methods Compared
|Method of Investing||Complexity Rating (1 = easy, 5 = hard)||Storage Costs?||Security Costs?||Expiration Dates?||Management Costs?||Leverage?||Regulated Exchange?|
The LME trades a contract on roasted molybdenum concentrate that contains molybdenum of 57 to 63% purity. Each contract represents 6 metric tons of molybdenum and is quoted in dollars.
Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, the contracts are physically settled by delivery of the metal.
Investing in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.
These financial instruments trade as shares on exchanges in the same way that stocks do. There is no ETF that offers pure-play exposure to molybdenum prices. The VanEck Vectors Rare Earth/Strategic Metals ETF (NYSEARCA: REMX) invests in many companies that mine for molybdenum as well as other rare earth metals.
Molybdenum ETFs by Assets Under Management
|VanEck Vectors Rare Earth/Strategic Metals ETF|
There are several other ETFs that invest generally in industrial metals, including:
While investing in companies can be a leveraged way to gain exposure to molybdenum prices, factors such as company management and the overall stock market can also affect these investments.
Shares of Molybdenum Companies
There are many companies that rely on molybdenum mining for a meaningful portion of their revenues including the following:
Top 3 Molybdenum Mining Stocks
|General Moly ||US mining company engaged in the exploration, development and mining of molybdenum and copper deposits, primarily in Nevada.||New York (NYSE)|
|China Moly ||Chinese company that is the largest molybdenum producer in Mainland China. The company also mines for tungsten, copper, cobalt, niobium, phosphorus, and other base and precious metals.||Hong Kong (HKEX)|
|Canadian-based company that mines for copper, gold and molybdenum in the United States.||New York (NYSE)|
One way to invest in molybdenum is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of molybdenum. The value of a CFD is the difference between the price of molybdenum at the time of purchase and its current price.
Some regulated brokers worldwide offer CFDs on molybdenum. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that traders can have exposure to molybdenum prices without having to purchase shares, ETFs, futures or options.
One of the leading brokers for trading metal commodity CFDs is Plus 500. Here’s why:
- No commission on trades (other charges may apply)
- Free demo account
- Easy to use (mobile-friendly) platform
- Industry-leading risk management tools
- Trade hundreds of other CFDs
- Your funds are safe – publicly listed company regulated by the UK’s Financial Conduct Authority and Cyprus’ Securities and Exchange Commission
Important: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail trader accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.