AM Insight: Market shares of leading molybdenum enterprises to expand in 2012
2012-03-06 17:42:11 [Print]
BEIJING (Asian Metal) 6 Mar 12 – In the middle February, domestic molybdenum concentrate price raised, moving up from the stagnant level of RMB1,780/mtu (USD12.82/lb) to above RMB1,800/mtu (USD12.96/lb) due to the rising international molybdenum price and adding resources tax of molybdenum ores in China, and the upward trend gradually expanded to some downstream products, such as ferromolybdenum etc. However, domestic molybdenum market fell back to quiet again in early March after the appreciation in price, with most molybdenum enterprises that had not experienced profits brought by the higher price, instead sinking into a dilemma of high price, dull sales and tight capital turnover. In the case, competitiveness of the industry should gradually shift to middle-to-large companies in the near future with leading enterprises that are expected to enjoy larger room to expand market shares, and middle and small-sized companies that are likely to be eliminated due to increasing costs and weakening competitiveness.
Firstly, the increase in molybdenum ore sources tax directly lifted molybdenum production costs and raised the industry entry standard indirectly, which requested molybdenum ore production to head for concentration, efficiency and control development direction, promoting government to integrate local resources and limiting small mines from disorderly mining and developing mines. Large and middle mines will gradually increase their market shares in the coming two years, though they will have to pay more taxes.
In early February, Ministry of Finance of China and SAT announced “Notice on Applicable Tax Rate Standard Adjustment of Tin Ore etc. Recourses”, heightening applicable tax rate standard of six mineral resources, namely iron ore, tin ore, molybdenum ore, magnesite ore, talc and boron. According to the “Notice”, molybdenum applicable tax rate standard was changed to: RMB12/t for first-class mines; RMB11/t for second-class mines; RMB10/t for third-class ones; RMB9/t of fourth-class mines; RMB8/t of fifth-class mines, all up by RMB4/t compared to the previous numbers.
Wen Zongyu, director of State-owned Economy Research Office of Finance Ministry Fiscal Science Research Institution, commented that the major reason for adjusting the taxes is that those resources are relatively tight judging from recovered reserves and future economic development needs while those resources’ exploitation levels are relatively low as most are exploited by small mines, leading by county-level governments; besides, the prices of those resources fluctuate in a large range, changing radically. Thus, the nation needs to regulate taxes of those resources, rising industry entry standards to guarantee a moderate development.
In addition, the resource tax levy will play an important role in promoting local economic development as the larger part of resources taxes to be paid by local enterprises will boost local activeness. The resource tax levy should become a relatively large tax item that will have a great influence on local fiscal levy, especially under the circumstance of local fiscal revenue being impacted by the volatile real estate market with sluggish land and house price.
Learned from producers, Asian Metal noted that as molybdenum ore tax was lifted by RMB4/t this time, molybdenum concentrate costs will raise by RMB40-80/mtu (USD0.29-0.58/lb) with national average level expected to rising by RMB70/t (USD0.50/lb) and annual taxes revenue increasing by millions. Take a middle-sized molybdenum mine that can produce molybdenum concentrate of 300-500tpm as example, it will generate more taxes of about RMB10 million and large mines can even reach RMB40 million. However, molybdenum market was weak with a good beginning and a poor ending in 2011 and outlook for 2012 is also pessimistic as large and middle-sized molybdenum mines are operating with difficulties, much less the small ones. Some molybdenum enterprises are doomed to be eliminated in such fierce competition.
Secondly, demand remains weak in steel industry, especially for ferromolybdenum, and the enterprises with financial strength will hold on to increase market share in the competition.
It is known that molybdenum is mainly used in steel industry, and about 70% of molybdenum concentrate is used for producing ferromolybdenum, then steel such as stainless steel, tool steel and special steel are produced by ferromolybdenum. Most ferromolybdenum plants are smelteries without mines, and they survive with processing profits. Therefore, the plants are under pressures of the upstream molybdenum mines and downstream steel industries, and capital becomes the main problem. The plants purchase raw materials such as molybdenum concentrate with cash, and some deals are concluded with cash and acceptance, while downstream steel mills always procure by acceptance, thus ferromolybdenum plants lack of cash. Some steel mills began to cut production or close in H2, 2011, and demand for ferromolybdenum declined. Some middle and small smelteries have not resumed production since Q4, 2011, and some plants noted that they will shut down due to sluggish future market this year. Finally, the enterprises with financial strength will hold on to increase market share in the competition.
Besides, Libo, a molybdenum analyst from Asian Metal commented that there are only 1/3 of molybdenum mines and smelteries who keep on producing and selling, less than a half; those companies capacity accounts for 2/3 of total capacity, but they are just running at around 60% of their production capacities.
(China was the largest exporting country of molybdenum with large capacity before 2008, while supply exceeded demand as exporting of molybdenum products was limited with increasing export tariff after 2008. Production can meet demand without full capacity these 3 years. )
Moreover, molybdenum chemicals and molybdenum products producers will compete according to high quality and high-end products, thus leading enterprises have advantages at present.
Although exporting of molybdenum concentrate and ferromolybdenum have been limited, China allows export of molybdenum chemicals and molybdenum products, especially high value-added products. Enterprises should cultivate and develop advanced material industry, and push forward transformation and promotion of the industry, to support development of strategic new industry and take a new road to industrialization.
(Ministry of Industry and Information Technology released “Plan of Advanced Materials Industry in the Twelfth Five Year” on 22nd, Feb., 2012. There are some major products of advanced materials relating to molybdenum such as high-quality molybdenum powder and molybdenum base, high specification molybdenum plate, high specification molybdenum electrodes, molybdenum-copper, TZM, flame plating molybdenum wire, rare earth molybdenum alloys, super size high-purity molybdenum sputtering target, high-purity molybdenum sputtering target, high-purity molybdenum and sputtering targets, etc.)
Overall, Chinese molybdenum industry will develop to “intensive, cluster, assembling, high-end, high quality, and high efficiency”, and leading enterprises should be responsible to lead Chinese molybdenum industry to a new road with their advantages.
Firstly, the increase in molybdenum ore sources tax directly lifted molybdenum production costs and raised the industry entry standard indirectly, which requested molybdenum ore production to head for concentration, efficiency and control development direction, promoting government to integrate local resources and limiting small mines from disorderly mining and developing mines. Large and middle mines will gradually increase their market shares in the coming two years, though they will have to pay more taxes.
In early February, Ministry of Finance of China and SAT announced “Notice on Applicable Tax Rate Standard Adjustment of Tin Ore etc. Recourses”, heightening applicable tax rate standard of six mineral resources, namely iron ore, tin ore, molybdenum ore, magnesite ore, talc and boron. According to the “Notice”, molybdenum applicable tax rate standard was changed to: RMB12/t for first-class mines; RMB11/t for second-class mines; RMB10/t for third-class ones; RMB9/t of fourth-class mines; RMB8/t of fifth-class mines, all up by RMB4/t compared to the previous numbers.
Wen Zongyu, director of State-owned Economy Research Office of Finance Ministry Fiscal Science Research Institution, commented that the major reason for adjusting the taxes is that those resources are relatively tight judging from recovered reserves and future economic development needs while those resources’ exploitation levels are relatively low as most are exploited by small mines, leading by county-level governments; besides, the prices of those resources fluctuate in a large range, changing radically. Thus, the nation needs to regulate taxes of those resources, rising industry entry standards to guarantee a moderate development.
In addition, the resource tax levy will play an important role in promoting local economic development as the larger part of resources taxes to be paid by local enterprises will boost local activeness. The resource tax levy should become a relatively large tax item that will have a great influence on local fiscal levy, especially under the circumstance of local fiscal revenue being impacted by the volatile real estate market with sluggish land and house price.
Learned from producers, Asian Metal noted that as molybdenum ore tax was lifted by RMB4/t this time, molybdenum concentrate costs will raise by RMB40-80/mtu (USD0.29-0.58/lb) with national average level expected to rising by RMB70/t (USD0.50/lb) and annual taxes revenue increasing by millions. Take a middle-sized molybdenum mine that can produce molybdenum concentrate of 300-500tpm as example, it will generate more taxes of about RMB10 million and large mines can even reach RMB40 million. However, molybdenum market was weak with a good beginning and a poor ending in 2011 and outlook for 2012 is also pessimistic as large and middle-sized molybdenum mines are operating with difficulties, much less the small ones. Some molybdenum enterprises are doomed to be eliminated in such fierce competition.
Secondly, demand remains weak in steel industry, especially for ferromolybdenum, and the enterprises with financial strength will hold on to increase market share in the competition.
It is known that molybdenum is mainly used in steel industry, and about 70% of molybdenum concentrate is used for producing ferromolybdenum, then steel such as stainless steel, tool steel and special steel are produced by ferromolybdenum. Most ferromolybdenum plants are smelteries without mines, and they survive with processing profits. Therefore, the plants are under pressures of the upstream molybdenum mines and downstream steel industries, and capital becomes the main problem. The plants purchase raw materials such as molybdenum concentrate with cash, and some deals are concluded with cash and acceptance, while downstream steel mills always procure by acceptance, thus ferromolybdenum plants lack of cash. Some steel mills began to cut production or close in H2, 2011, and demand for ferromolybdenum declined. Some middle and small smelteries have not resumed production since Q4, 2011, and some plants noted that they will shut down due to sluggish future market this year. Finally, the enterprises with financial strength will hold on to increase market share in the competition.
Besides, Libo, a molybdenum analyst from Asian Metal commented that there are only 1/3 of molybdenum mines and smelteries who keep on producing and selling, less than a half; those companies capacity accounts for 2/3 of total capacity, but they are just running at around 60% of their production capacities.
(China was the largest exporting country of molybdenum with large capacity before 2008, while supply exceeded demand as exporting of molybdenum products was limited with increasing export tariff after 2008. Production can meet demand without full capacity these 3 years. )
Moreover, molybdenum chemicals and molybdenum products producers will compete according to high quality and high-end products, thus leading enterprises have advantages at present.
Although exporting of molybdenum concentrate and ferromolybdenum have been limited, China allows export of molybdenum chemicals and molybdenum products, especially high value-added products. Enterprises should cultivate and develop advanced material industry, and push forward transformation and promotion of the industry, to support development of strategic new industry and take a new road to industrialization.
(Ministry of Industry and Information Technology released “Plan of Advanced Materials Industry in the Twelfth Five Year” on 22nd, Feb., 2012. There are some major products of advanced materials relating to molybdenum such as high-quality molybdenum powder and molybdenum base, high specification molybdenum plate, high specification molybdenum electrodes, molybdenum-copper, TZM, flame plating molybdenum wire, rare earth molybdenum alloys, super size high-purity molybdenum sputtering target, high-purity molybdenum sputtering target, high-purity molybdenum and sputtering targets, etc.)
Overall, Chinese molybdenum industry will develop to “intensive, cluster, assembling, high-end, high quality, and high efficiency”, and leading enterprises should be responsible to lead Chinese molybdenum industry to a new road with their advantages.
Molybdenum Oxide 50%min EXW China
Unit:RMB/dmtu
China ferromolybdenum producers' suspension number statistics by province by month
Unit: pcs
