Primary molybdenum projects will be critical to the future market balance, while the timing of the contribution from by-product sources remains uncertain.

Amid the backdrop of record high molybdenum prices, developments at primary molybdenum mine projects have made the headlines over the past year. In China, Zijin Mining’s acquisition of the large Shapinggou molybdenum project (the largest molybdenum deposit in the world) was a noteworthy development and offers the prospect of reduced molybdenum feedstock tightness over the coming years. Zijin Mining is set to start construction in the near term, with the mine expected to be commissioned in 2026/27. In Greenland, another primary molybdenum deposit, the Malmbjerg project, is being developed by Greenland Resources and would represent another significant source of primary units for the market. The company has quickly advanced the project, releasing a definitive feasibility study (DFS) in 2022.

When referring to molybdenum feedstock operations (primary vs by-product) it is important to note that these are characterised by markedly different scales of production capacities. Of the primary molybdenum operations being tracked by Project Blue, these are associated with significantly more molybdenum concentrate than molybdenum produced as a by-product from copper mines. For example, the Shapinggou project is stated to have a production capacity of over 25ktpy Mo-in-concentrate compared to the molybdenum plant at the Quellaveco mine in Peru, which has the potential to produce up to 10ktpy Mo-in-concentrate. Despite their scale, the number of primary molybdenum mines under development is far lower than copper-molybdenum mines. As a result, the successful development of the primary molybdenum projects is of key significance for supply to keep pace with future demand growth.

Molybdenum market remains undersupplied

Project Blue data shows that the molybdenum market deficit was around 20kt Mo last year, a shortfall that is expected to persist unless new sources of molybdenum feedstock are brought online.

Based on International Molybdenum Association’s (IMOA) latest data, the supply shortfall is expected to reduce through this year. Q1 2023 global production decreased by 3% to 66.6kt Mo q-o-q. However, this represented a 5% increase when compared to Q1 2022. China’s stuttering economic recovery contributed to global molybdenum consumption in Q1 2023 declining by 8% q-o-q to 65.3kt Mo, a 6% fall y-o-y. Supply from China is expected to rise moderately while other major producing regions such as Chile, Peru, the USA and Mexico are expected to have mixed production results.

Project Blue’s expectations for molybdenum demand is for modest growth of 2.2%py over the next decade. Most of this growth will come from engineering, structural and stainless steel sectors. However, despite the modest demand growth, recent supply disruptions at copper mines highlight the criticality of molybdenum given its large dependence on copper market fundamentals.

Chinese feedstock increases, while copper-molybdenum producers face challenges

Copper mines represent the main source of molybdenum supply, currently accounting for approximately 65% of the market. The remaining production is formed by a few primary molybdenum mines in China and the USA. Molybdenum by-product supply is thus an important source of units for the market but will ageing copper mines impact the molybdenum market negatively?

Chinese molybdenum concentrate production has strengthened, increasing from 88kt Mo in 2020 to over 110kt Mo in 2022. The increase in production was necessitated by surging demand from Chinese ferromolybdenum producers, looking to secure feedstock amid the supply shortages from South America and rising demand from China’s steel and stainless steel industries.

Outside of China, South America (Chile and Peru) is the second-largest molybdenum-producing region, but has been impacted by operational disruptions, including protest action and declining ore grades in recent years. The result has been a 17% decrease in South American production since 2020. North American (USA and Mexico) supply has also declined by almost 30% since 2020. While China’s molybdenum output remains on an upward trend, an uncertain supply outlook from North and South American copper producers poses a major supply risk unless new projects are commissioned.

Can molybdenum producers keep pace with demand?

Against the backdrop of the current molybdenum supply deficit and modest demand growth, feedstock availability remains the main headwind impacting the market. Mine projects (both copper-molybdenum and primary molybdenum) are actively being explored. Regions such as the Andean porphyry belt in South America, as well as the Golden Triangle in British Columbia, Canada, host abundant mineral-rich deposits. The challenges and uncertainty surrounding newly discovered deposits is the lengthy timeline for their development (from discovery to production). On average, it can take a minimum of 10 years before copper-molybdenum or primary molybdenum projects are commissioned. Capital expenditure, rising mining costs, environmental and social issues are some of the main hurdles that project developers must overcome in order to bring their first material to market.

In total, Project Blue is tracking 87 mine projects (primary molybdenum and copper-molybdenum) globally. The development stages of these vary from those that are newly discovered deposits to projects that are under construction. Of these projects, 19 are more advanced, releasing either a pre-feasibility study (PFS), preliminary economic assessment (PEA), a definitive feasibility study (DFS) or are under construction.

In the medium term, Project Blue believes three primary molybdenum mines could be commissioned over the next 10 years, contributing 40-50ktpy of molybdenum in concentrate, the largest of which is the Shapinggou mine in China.

Given copper’s key role in the energy transition, further mine developments will be required to provide additional sources of supply. Of the molybdenum coming from these by-product projects, Project Blue believes that between three and six have a good chance of being commissioned over the next decade. Zijin Mining’s Rio Blanco copper-molybdenum project in Peru is set to commence construction and be commissioned in the near term, producing between 5-7ktpy Mo. Most of the copper-by product projects are at least at the PFS stage of development, however, given the historical timescales associated with bringing copper projects online, only a small portion is likely to be successfully commissioned over the next 10 years. This would add between 10-20ktpy Mo. A major risk to copper by-product supply sits with the exhaustion of open pits and whether the mine operators invest the capital to go underground. Alternative sources of copper, such as the Central African Copper Belt, come with cobalt by-products rather than molybdenum.

With molybdenum demand rising steadily, additional feedstock will need to be commissioned in order to satisfy ferromolybdenum and steel producers’ requirements. Project Blue forecasts the market to remain in deficit until 2025, which could cause a supply-driven drop in demand unless projects accelerate plans to commission.