Recent disruptions at copper mines highlight the criticality of global by-product molybdenum supply.

Molybdenum supply married to copper

Molybdenum is mined largely as the sulphide mineral molybdenite which is commonly associated with porphyry systems. Economic grades of the mineral are either found in molybdenite-dominant porphyry deposits as a primary economic mineral, or as a by-product of copper porphyry mines. South America’s copper porphyry deposits have become an important source of by-product molybdenum and primary mines now only account for around one-third of global supply. The grades of molybdenite vary across porphyry systems different to that of copper and as a result, its availability is linked to the mine plan of copper, rather than that of molybdenum.

Prices moving back towards record levels to end 2022

Prices of molybdenum soared to over US$60/kg in December 2022, for ex-Works China prices. The last time molybdenum saw these levels was back in 2005-2008. Molybdenum is used mainly as a steel alloy and its demand outlook is linked to the fortunes of HSLA (high-strength low-alloy) and stainless steels, both of which with a role to play in the energy transition narrative of the steel industry. However, H2 of 2022 saw weak economies place downward pressure on most alloy prices but molybdenum was one of the outliers of the year. This was due to supply disruption at South American copper mines that tightened the molybdenum market and supported month-on-month soaring prices.

Modest demand growth faces supply risks

Project Blue forecasts for molybdenum demand are modest compared to some of the headlining energy transition critical materials, at a CAGR of 1-2% to 2050. However, despite the modest demand growth, recent disruptions at copper mines highlight the criticality of molybdenum.

In the medium term, Project Blue sees by-product supply from South America recover from the current low, but demand growth will require additional capacity before the end of the decade. Demand is expected to be met mainly from a new primary molybdenum mine in China, which when commissioned around 2027-2028 will potentially become the single largest source of molybdenum.

Long-term, several open pit copper mines are forecast to reach their end-of-life and mine plans for copper will directly impact by-product molybdenum supply. If exiting pits are expanded, the molybdenum grades in the active run-of-mine will decline, whereas if mines choose to go underground, such as is the decision for Rio’s Bingham Canyon, molybdenum grades could remain high but then depend on mining volumes. A further risk is if alternate copper deposits with no molybdenum mineralisation capture the growing copper market. In either scenario, the supply availability of molybdenum is closely linked to the mine plans and survival of copper porphyry deposits.