3M’s Rising Once Again

Added March 5th, 2010 by Anthony David

In the world of specialty metals, three are of growing interest to investors worldwide – the three Ms, Manganese, Magnesium and Molybdenum. It comes as no surprise that China continues to significantly influence the global market for these metals, recording high levels of consumption and production to feed its behemoth steel industry, even as the rest of the global market succumbed to the financial crisis and witnessed a downturn last year.

Manganese (Mn)
Manganese is a critical metal, ranking fourth in terms of annual global consumption, after only iron, aluminum and copper. Because steel cannot be produced without it, as much as 90-95% of the total manganese produced is used in the steel industry. Global output of manganese ore rose from 12.77 million tonnes in 2007 to 13.85 million tonnes in 2008. But the year 2009 witnessed a depressed market in response to declining output of crude steel, and leading miners adopted severe counter-measures, curbing output by 40–50% year on year.

Electrolytic Manganese prices which were around $2650 a tonne at the end of 2009 dropped slightly and then showed an increase to $2900 in early February 2010. As the global steel industry is now showing signs of revival, a shortfall in manganese ore stocks is putting an upward pressure on prices. China continues to remain the largest market for manganese, accounting for 48% of the world’s total consumption, but is home to only 8% of the global reserves. The trend of increasing prices is likely to continue. As with the other metals, China is the country to watch out for.

Magnesium (Mg)
China leads the global market in consumption of magnesium and is also the largest producer of the metal, accounting for over 85% of the global production of 774,000 tonnes in 2007. However, Western nations are also expected to witness rapid growth in consumption of about 10% per annum in the coming years, exceeding 650,000 tonnes of consumption by 2010. Over the past three years, prices worldwide first tripled from a little over $2,000 per tonne in early 2007 to a high of $6,200 per tonne in April–May 2008 before plummeting below $2,800 in late 2009 and then stabilizing around that level.

Molybdenum (Mo)
The global molybdenum market witnessed a tightening of supply in mid-2009, as major producers enforced savage cutbacks and China continued to pile on stocks, causing prices to spike. Prices for both ferromolybdenum and molybdic oxide nearly doubled between July and August 2009, only to plummet by 50% over the following two months. Since November, molybdenum prices have increased by almost 50% to reach $15 per pound by January 2010, in line with the general trend in commodity prices worldwide. With demand expected to rebound this year, prices are likely to stabilize at current levels.

In terms of consumption, China defied global trends last year, registering an increase of 5% in consumption even as global consumption declined by 9% over the same period. This trend is expected to continue for another five years, with the developed markets of the US, Japan and Europe together paced for a relatively slow growth in consumption, at 2% per annum, and Chinese consumption forecast to grow at an average annual rate of 9%. Even with a major new Australian mine that is slated to start production in late 2011, the world is likely to face a deficit in molybdenum by 2014.

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