Molybdenum chemical market to remain dim in H2 2020

Asian Metal: Mr. Xu, please give us an introduction of your company's business history, production capacity and the output of molybdenum chemical products. By the way, could you tell us something about your current production?

Mr. Xu: Our company was formerly known as Anqing Yueshan Copper Metallurgical Chemicals Plant under Anqing Yueshan Copper mine, which was established in 1987 and put into commercial production in 1988. In 2003, the Plant was on the verge of bankruptcy as its mines ran out of resources. Before that, it had restructured its subsidiaries responsible for their own profits and losses, with the private equity accounting for a third at first. Then, all the state-owned shares were required to withdraw before the end of 2005, while our four shareholders finished the purchases of all these shares at the end of 2004. As a result, the Plant became a private enterprise. In 2008, we rebuilt the Plant in Anqing High-tech Zone (chemical industry area), and put it into commercial operation in 2010. Our current molybdenum chemical products include ammonium molybdate, high-purity molybdenum oxide and sodium molybdate, with the annual production capacity of 1,500t, 2,000t and 500t, respectively. In addition, we have a halogen-free flame retardant production line with an annual capacity of 3,000t, which helps us achieve transformation and upgrading and tends to be mature and stable. Our annual output of molybdenum chemicals was above 2,500t in the past three years.

Asian Metal: What is your company's position in the industry?

Mr. Xu: Yuetong Molybdenum ranks among the top five in the molybdenum chemical industry, and the top three are state-owned enterprises and listed enterprises. However, our company is widely recognized in terms of market share, molybdenum chemical capacity and production technology. With a long history, our company produces products with steady quality, which are well received by customers at home and abroad.

Asian Metal: What's your plan for future production technology upgrading?

Mr. Xu: We will continue the transformation and upgrading and apply new technologies. We have signed a technical cooperation agreement with a domestic university to directly produce ammonium dimolybdate through the process of extraction, purification, evaporation and crystallization, which reduces the consumption of nitric acid and liquid ammonia and thus cuts production costs. The production process avoids the generation of ammonium nitrate wastewater and environmental pollution.

Asian Metal: The current market is seriously affected by the COVID-19. What do you think the market in the second half of the year?

Mr. Xu: Affected by the pandemic, downstream demand in Chinese market became weaker and weaker in the past two months, and that in the international market was also sluggish. As a result, a large quantity of low-cost imported molybdenum raw materials flooded into the domestic market. The price for domestic molybdenum concentrate drops from around RMB1,700/mtu (USD11.09/lb) EXW D/P in mid-February this year to RMB1,300/t (USD8.48/lb) EXW D/P at the moment, but it is still higher than those for molybdenum oxide and molybdenum concentrate abroad. Due to the difficulty in controlling the pandemic in the short term, we are pessimistic about the production resumption in foreign countries in the second half of 2020, and foreign molybdenum raw materials will continue to flood into China, bringing a great challenge to the domestic molybdenum market. Due to the limited demand in Chinese market and sufficient domestic and foreign supply of molybdenum raw materials, prices for molybdenum products are bound to keep falling. We learned from customs data that China imported more than 6,000t of molybdenum concentrate and molybdenum oxide in May 2020.

Asian Metal: What are the impacts of the COVID-19 pandemic on domestic and foreign downstream demand this year?

Mr. Xu: As the pandemic in China has been effectively controlled, our domestic demand just slightly declined, while that in the international market decreased significantly. Our regular export volume of molybdenum chemical products accounts for 25% of the company's total exports. However, the figure falls noticeably now as the demand from our overseas customers decreases sharply amid the pandemic. The volume of our export order is usually more than 20t each time, but that of most orders is less than 10t this year.

Asian Metal: What challenges do you think the domestic molybdenum raw material market will face this year?

Mr. Xu: As overseas prices for molybdenum raw materials were lower than those for domestic ones, we have started to import molybdenum oxide from the international market since this March. According to the customs data, the imports of molybdenum concentrate and molybdenum oxide increased month by month in the past three months. Because most foreign molybdenum raw materials are copper-molybdenum ores, the production cost of foreign producers is lower than that of most domestic pure molybdenum mines, and thus the prices are also lower than those of the latter. It will force domestic molybdenum concentrate prices to decrease and even approach the costs, and consequently some domestic mines may have to suspend production.

Asian Metal: Will your company adjust production in the future?

Mr. Xu: In the future, we will expand our annual production capacity to 5,000t when domestic and overseas demand returns to normal. Meanwhile, we will strive to improve product quality, provide customers with high-quality products and establish stable and long-term cooperation with them.

Asian Metal: Thanks for accepting our interview.

Mr. Xu: Thank you for inviting our company for this interview.