Molybdenum, a Super Alloy in Specialty Steels, Enhances End Products

  • Global growth in energy, transportation and construction calls for increased molybdenum-containing steels
  • Light vehicle sales worldwide are projected to rise 1.5% this year
  • Global air passenger traffic projected to double by 2035
  • World construction output expected to rise faster than GDP rates

by Bruce Hansen

Today, steel companies are moving toward manufacturing more value-added, lighter and stronger specialty steels in their product mix. These specialty steel products adhere to higher quality standards required by their end users and generate increased economic value.

Molybdenum (moly) plays a critical role in this value chain and is called for in making higher quality steels. It is a super alloy that is added to molten steel during steelmaking, enhancing the end products with properties such as strength, hardness, durability, corrosion resistance and high-temperature tolerance.

In last month’s Moly Bits, we observed the recovery of the global steel industry for the first half of 2017, making note of the renewed expansion of major emerging markets, some of which are the world’s largest steel markets. In this issue, we provide an overview of the diverse end-use applications of moly-containing steel products. These applications range from energy, transportation, construction, to home appliances we cannot live without.

Moly is an essential alloy in full alloy steel and stainless steel, each making up 21% of total moly consumption, according to estimates from the CPM Group. High Strength Low Alloy steel (HSLA steel) and tool steel account for a further 11% and 10% of total consumption. These four pillars of moly’s steel use are expected to increase at a compound annual growth rate of 3.2% to 3.8% between 2016 and 2025. Carbon steel accounts for the rest of moly’s use in steel.

Chart 1: Molybdenum Consumption, 2016E  

Source: CPM Group

Moly is a true energy metal, with almost half of its end use going to oil and gas, petrochemicals, automotive, other transportation, aerospace and power generation sectors.

Chart 2: Diverse End Uses of Molybdenum

Source: SMR Research

The oil, gas, and petrochemical industries are the largest end users of moly, especially in moly-alloy steel.  As we noted in our inaugural Moly Bits in July 2017, the ongoing resurgence in oil and gas downstream activities is fueling demand for various moly-containing specialty steel products.

Natural gas is expected to supplant coal as the second largest source of fuel for electric power generation by 2035, according to BP’s Energy Outlook 2035The Shell LNG Outlook forecasts that global LNG demand will rise at 4-5% per year from 2015 to 2030, driving robust LNG trade activities around the globe. We also noted the steady increase in the Baker Hughes’ North American and global operating rig count since it bottomed in 2016.

The ongoing strengthening of the oil and gas industry will funnel additional upstream and downstream capital expenditures, which will go into drilling equipment, pipelines, storage, shipping and processing facilities for LNG. This infrastructure upsurge will be positive for specialty steels, driving the usage for moly in full alloy steels, which include the oil country tubular good steels (OCTG steels), a type of steel heavily used in petroleum exploration and production.

Chart 3: Steel Application Examples in Oil & Gas Drilling

Source: Timken Steel 2017 investor presentation

Aside from fossil fuels, moly is also used in the rapidly growing renewable energy sector, helping reinforce the steel components of wind turbines. Moly-related steels are especially prevalent in wind turbines used off-shore.

Moly is used in all means of major transportation. About 15% of moly consumption is in the automotive sector and as much as 8% is from other transportation applications, according to the SMR research.

In automobiles, moly-containing full alloy steels, stainless steels and HSLA steels are built into the frames, various body parts and components. For example, in auto engines, particularly diesel engines, molybdenum-containing steel parts can help reduce weight and enhance strength. These advanced steels are staples of today’s automobile manufacturing industry, having replaced the low-moly carbon steels that were used by this industry two decades ago.

Chart 4: Steel Application Examples in Automotive

Sources: Top illustration from and bottom illustration from Timken Steel 2017 investor presentation.

By the CPM Group’s estimate, a typical vehicle today contains about one pound of molybdenum.

Besides automobiles, moly is also vital for the operational performance of planes, trains and ships. In trains, for example, moly-containing steels are used in locomotive shafts, wheels, the coating of wheel seats and in brake pads. In shipbuilding, moly-containing duplex stainless steels are used in the construction of bulkheads and the hulls of tankers.

IHS Markit projects global light vehicle sales will increase by 1.5% over 2016 to 93.5 million vehicles in 2017, with China leading with 1.9% year-over-year growth to 28.5 million vehicles in 2017.

In the United States, monthly annualized light vehicle sales have bounced back from the bottom in February 2009 of 9.0 million vehicles to 18.5 million in September 2017, according to the U.S. Bureau of Economic Analysis. A surge in replacement demand after Hurricanes Harvey and Irma helps generate some near-term momentum for auto sales, which is expected to stay strong through the end of this year.

While annual auto sales growth in the U.S. appears to have plateaued since 2015, the U.S. auto market could resume its growth from 2018 onward with a stronger economy and with consumers looking to replace their old vehicles.

Chart 5: Robust U.S Sales in Light Vehicles
(Millions of vehicles)

Source: 2010-2016 Economic Research, Federal Reserve Bank of St. Louis; 2017 IHS Markit estimate; 2018-2020 estimates by Universal Stainless & Alloy Products/IHS Markit.

The aerospace and defense industry accounts for 4% of global moly consumption, according to SMR Research. From turbine engines to high-strength, light-weight fuselages, wings and landing gears, aircrafts typically use superalloys containing 2%-25% of moly.

The rising demand for air travel will fuel growth in the manufacturing of aircrafts. Global passenger air travel increased 7% year-on-year in 2016, which registered 3.8 billion airline passengers, according to the International Air Transport Association(IATA). IATA expects the global passenger traffic to double to 7.2 billion by 2035, driven by demand in emerging economies.

Taking a step back from the above-mentioned energy and transportation sectors, we also need to note that it takes super-strength tool steel and high-speed steel to cast, cut, punch, mill, hammer and extrude most forms of manufacturing. Moly is added into tool steels to prevent metal fatigue and weld decay. These moly-bearing steels are widely used by steel mills, metal fabricators, and other heavy industrial users. Moly’s end uses in the mechanical engineering and process segments represents up to 23% of its total consumption.

Global building and construction accounts for another 6% of moly end use. Worldwide construction activities are booming, an estimated 3.9% annual growth between 2015 and 2030, according to the Global Construction Perspectives and Oxford Economics’ Global Construction 2030 report.

The report forecasts that world construction output volume will increase 85% from 2015 to $15.5 trillion by 2030, led by China, the United States and India. India is projected to grow twice as fast as China to 2030 and overtake Japan as the world’s third largest construction market by 2021. The report also highlights that the global construction market is growing faster than the world GDP, as Asian economies industrialize and as emerging economies undergo rapid urbanization.

In the United States, the construction sector consumes over 40% of the steel supplied in the domestic market, followed by the automotive and energy sectors, according to the American Iron and Steel Institute.

Chart 6: 2016 U.S. Steel Shipments by Market Applications

Source: American Iron and Steel Institute.

The U.S. construction market has trended higher from the beginning of 2011 to date, according to the Census Bureau’s Construction Put-In-Place (CPIP) data.  Construction spending for the first eight months of 2017 increased 4.7% year-over-year, led by increased private expenditures in residential buildings and in commercial and transportation sectors. Private construction dominated 78% of all U.S. construction spending for the first eight months of 2017.

While it is too early to predict the changes that may be brought by the Trump administration’s plan to build infrastructure, a substantial amount of private sector investment in the construction sector is already underway and growth looks intact for the foreseeable future.

As “minor” as moly is referred to as a metal, it is ubiquitous in nearly every aspect of consumer and industrial life, generating a major impact in the quality of steel and other applications. We believe it is a metal of the future, as the world continues to become more sophisticated, and expect to see broader applications of moly in the years to come.

Moly Bits is a new blog published by General Moly, Inc. The prior two issues are available at  Bruce is not only Chief Executive Officer of General Moly but he is also the largest individual insider owner of 2.6% of GMO shares and recently purchased 20,000 GMO shares at $0.37 per share. 

Market Corner

This message is the opinion of the writer. General Moly does not publish any updates or revisions of opinions nor of the information presented except as required by securities laws.

The information presented contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the safe harbor created by such sections.  Such forward-looking statements include, without limitation, (i) estimates of future molybdenum, other commodities and markets, as mentioned, prices, demand, supply and/or production; (ii) estimates of future capital expenditures; (iii) statements regarding cost structure, project economics, or competitive position; (iv) statements regarding cost structure, project economics, or competitive position, and (v) statements related to potential market signals.  Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.  However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.  These risks and uncertainties include, but are not limited to, metals prices and production volatility, global economic conditions, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, exploration risks and results, political, operational and project development risks, adverse governmental regulation and judicial outcomes.  For a more detailed discussion of such risks and other factors that could affect the Company, see the Company’s Annual Report on Form 10K, which is on file with the Securities and Exchange Commission, as well as the Company’s other SEC filings.

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