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    Molybdenum concentrate demand to remain strong in 2021
    ----Interview with Wei Zhang
    General Manager
    Fengning Xinyuan Mining Co., Ltd.
    Fengning Xinyuan Mining Co., Ltd. is located in Fengning Manchu Autonomous County, Chengde City, Hebei Province,bordering on Beijing on the south, Zhangjiakou on the west, and Inner Mongolia Plateau on the north. The private joint-stock enterprise, established in 2003 with the registered capital of RMB166 million (USD25.58 million), owns 600 employees, among which managers and technicians are more than 80. Approved by the Ministry of Natural Resources (MNR)) of China, the company obtained the mining right of Sadaigoumen molybdenum ore deposit. As one of the main molybdenum concentrate producers in China, the company produces high purity molybdenum concentrate, which is widely favored by downstream consumers.

    Asian Metal: Mr. Zhang, please give us an introduction of your company history and current status.

    Mr. Zhang: Fengning Xinyuan Mining Co., Ltd. was found in 2003, when its annual output of molybdenum concentrate was 3,000t. In 2007, the company increased its output to about 6,000t, and its annual output has been stabilized at 12,000-13,000t since 2008. Our mine has a reserve of about 290,000 metal tons of molybdenum, with the average grade of the raw ore standing at 0.06%. Our current daily ore processing capacity is 30,000t, and the production of our company is relatively stable.

    Asian Metal: What do you think of the molybdenum concentrate industry in 2020?

    Mr. Zhang: Affected by the COVID-19 pandemic, overseas molybdenum market saw sluggish demand in 2020. Due to China's good performance in pandemic control, a large amount of molybdenum concentrate and molybdenum oxide flooded into China. According to statistics from China Customs, China's monthly imports of molybdenum concentrate and molybdenum oxide both exceeded 10,000t from August 2020, more than 50% of the monthly production of domestic molybdenum concentrate. A large quantity of molybdenum raw materials surged into the domestic market, resulting in a decrease in the domestic molybdenum concentrate price from RMB1,800/mtu (USD11.67/lb) EXW D/P at the beginning of 2020 to the bottom of RMB1,240/mtu (USD8.04/lb) in July 2020. As domestic demand remained strong in the fourth quarter of 2020 and prices for steel products rose, molybdenum concentrate prices start to edge up steadily to the current RMB1,500/mtu (USD9.73/lb) EXW D/P. Therefore, we are optimistic about the market outlook.

    Asian Metal: Could you introduce the sales models for molybdenum concentrate in China? What kind of sales model does your company apply now?

    Mr. Zhang: Molybdenum concentrate in China is mainly sold through signing long-term contracts, inviting bids online and selling on the spot market. At present, we adopt two sales models, with 60% of our production sold to fixed customers by concluding long-term contracts, and 40% sold by online bidding.
    In this way, we can maintain stable sales, and at the same time sell at a high price when prices show an upward trend.

    Asian Metal: Do you think it is necessary for mines to sign long-term contracts with downstream consumers?

    Mr. Zhang: We have signed long-term molybdenum concentrate orders with regular downstream consumers since 2017 and have renewed some orders for 2021. Other customers also want to sign long-term contracts with us, and even our regular customers intend to increase their monthly purchase volume in long-term orders. However, as our output is limited, we can only enter fixed volume arrangements with regular customers. At present, China sees excess production capacity for ferromolybdenum, so the domestic supply of molybdenum concentrate determines whether the production of ferromolybdenum enterprises can be stable. When the market outlook is bullish, most molybdenum concentrate holders expect higher prices and show little willingness to sell. As a result, downstream consumers have difficulty in sourcing the material and thus it is important for them to sign long-term orders. Therefore, most domestic molybdenum concentrate mines prefer to sell their products through long-term contracts.

    Asian Metal: With molybdenum concentrate prices increasing steadily, what do you think about the market demand in 2021?

    Mr. Zhang: Due to the strong demand from domestic steel mills, domestic molybdenum concentrate prices are on the rise at present. I believe that domestic market demand is bound to increase in 2021. Besides, if the overseas pandemic is effectively controlled and the demand is released, a large amount of imported molybdenum oxide and molybdenum concentrate in Chinese market will return to the international market, and then prices for molybdenum concentrate will increase further. In addition, the effective control of the COVID-19 pandemic abroad will improve the overall economic environment, which is conducive to the development of molybdenum market. Thus, we have confidence in the molybdenum concentrate market in 2021, when the demand is expected to be strong.

    Asian Metal: What are the important conditions for molybdenum concentrate producers to ensure stable production?

    Mr. Zhang: For molybdenum mines, stable production is an important factor for downstream consumers when they decide whether to maintain long-term cooperation with the miners. Molybdenum concentrate producers should strive to meet the national standards in environmental protection, and safety production is also their responsibility. This year, the tailings pond leakage occurred at a large domestic molybdenum mine led to the production suspension for half a year, which not only affected the supply for downstream customers but also polluted the local environment. Therefore, I believe environmental awareness and safety production is the prerequisite of stable development.

    Asian Metal: What are your plans for 2021?

    Mr. Zhang: In 2020, our production and sales was normal on the whole, but affected by the large volume of imported raw materials in Chinese market, molybdenum concentrate prices had been lower than RMB1,500/mtu (USD9.73/lb) for a long time. In 2021, we will pay more attention to the recycling of tailings sand and adhere to the concept of production without hazardous waste. Besides, we will continue to ensure stable production and maintain long-term cooperation with downstream customers.
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