Chinese Traders Resume Spot Ferromoly Export to Europe After 4 Years

China's molybdenum producers resumed exports of ferromolybdenum to Europe on a spot basis this month after a quiet trading period of almost four years, but they were exporting from South Korea instead, sources said 24 February,2011.

China has not been actively exporting ferromoly since 2007, following the imposition of a 20% export tax by the government in November 2006. The tax was introduced to ferroalloy products in a bid to curb production of energy-intensive products and to protect the country's natural resources.

Chinese market participants have returned to international ferromoly trade, this time by shipping ferromoly from South Korea instead of China to avoid the 20% export tax, according to South Korean ferromoly plant sources. South Korea does not levy any export duty. Moreover, South Korean ferromoly exports to the EU will be duty-free from July 2011 as the free trade pact between the two entities takes effect.

The EU imposes a 2.7% duty on ferromoly imports from other countries.

Chinese producers had approached South Korean ferromoly plants last year, seeking the possibility of striking tolling arrangements with them -- China ships moly oxide to South Korea, then the South Korean plants convert that to ferromoly by charging a processing fee, and China re-exports it to Europe.

Another option currently in discussion -- China sells moly oxide to South Korea, South Korea converts it into ferromoly and resells it to China, said one Korean source.

China imposes a 15% export tax on moly oxide, but foreign-origin moly oxide stored at bonded warehouses in China may be exempted from the export tax in some cases, sources said.

The Chinese producers seeking tolling in South Korea are private companies, including a major player with a capacity to produce over 10,000 mt/year of moly oxide and a 4,000 mt/year producer.

State-run producers, however, were not among them, South Korean sources added.

South Korea has six plants that produce ferromoly regularly. Some producers make ferrovanadium and other ferroalloys along with ferromoly.

Annual South Korean ferromoly production is 12,000-13,000 mt, sources said.

Meanwhile, a Chinese producer reported selling prompt 40 mt non-Chinese origin ferromoly this week at $44/kg in-warehouse Rotterdam, on a cash basis, to a European trader. Platts last assessed ferromoly on February 17 at $43.30-44/kg in-warehouse Rotterdam, duty unpaid basis. The producer had started a tolling arrangement with South Korea last year.