Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Prices for molybdenum have dropped for eight straight months, weighing on returns for mining companies including Freeport-McMoRan Inc., the world’s top producer.

ANTARA FOTO/REUTERS

An obscure metal used to make steel has become this year's worst-performing commodity, after China's stumbling economy and a collapse in the energy industry drove outsized losses.

Molybdenum – that's mo.lyb.de.num for the uninitiated – is used in many steel building materials and to help harden the drills used to extract oil and natural gas from deep underground. Prices plunged 49 per cent, the most among 79 raw materials tracked by Bloomberg, as the white metal was undermined by the flagging demand and oversupply that plagued global commodity markets throughout 2015.

Use of the metal tumbled 5.1 per cent this year, the biggest contraction since 2009, driven by a slowdown in China, the world's biggest metals and energy consumer, according to Macquarie Group Ltd. Prices have dropped for eight straight months, the longest slump since 2011, weighing on returns for mining companies including Freeport-McMoRan Inc., the world's top producer.

Story continues below advertisement

"It's like a poster child for the commodity bear market," said Paul Christopher, a St. Louis-based head global market strategist for Wells Fargo Investment Institute, which oversees $1.7-trillion (U.S.). "We don't have a positive outlook on metals, including molybdenum, because they've been overproduced. They will continue to do the worst, not just because China's demand is slipping still, but also because there's not been enough supply adjustment."

Twelve-year low

Prices for molybdenum oxide tumbled to a 12-year low of $4.616 a pound in November, according to monthly data from Metal Bulletin. The drop exceeded the 34-per-cent decline for crude oil and the 26-per-cent slide in the Bloomberg commodity index, a gauge of returns from 22 items that is headed for its biggest annual decline since the recession in 2008. Molybdenum for immediate delivery traded on the London Metal Exchange slumped 41 per cent this year to $12,000 a tonne ($5.44 a pound).

About half of molybdenum is produced as a byproduct of extracting other metals, mainly copper. Because it makes up a small portion of revenue for mining companies, suppliers are slower to respond with output cuts when prices tumble, said Mu Li, an analyst at commodity researcher CPM Group in New York. Production topped demand by 40.9 million pounds in 2015, the biggest surplus since at least 2002, according to Bank of America Corp.

The most common use of the metal is to make steel harder, stronger and more heat-resistant, which is appealing for energy producers for components including oil rigs. The collapse in crude prices to a six-year low has cut demand for. Some estimates show that pipes and tubes used by the energy industry account for almost 20 per cent of global molybdenum consumption, said Barbara Buck, vice-president of marketing and sales at Climax Molybdenum Co., a unit of Freeport.

"The primary reason for the decline in molybdenum prices has been a slowdown in demand," Ms. Buck said in an e-mailed response to questions from Bloomberg. "This has been attributable, in part, to a decline in demand related to the fall in the oil and gas prices, and the resulting reduction in the number of active oil rigs."

'Sustained' slump

Story continues below advertisement

Still, the announced cutbacks are being "almost completely cancelled out" because of increasing output through byproduct extraction at copper mines in South America, said Edward Spencer, a senior consultant at London-based researcher CRU. This will keep stockpiles high and could lead to a "sustained" period of low prices, he said in an e-mail.

"It's oversupply from copper that creates such an imbalance," said John Meyer, an analyst at SP Angel in London. "So many copper producers can produce molybdenum at very low cost by virtue of byproduct production. And the steel industry only needs so much of it."

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies