South Korea, the world's fifth-largest steelmaking nation, opened the nation's first smelter for molybdenum, used to strengthen the alloy, to cut costs and export to Japan and Taiwan amid surging prices.
The smelter, located in Yeosu, 455 kilometers south of Seoul, will have initial production capacity of 6,000 metric tons a year, making it the world's seventh-largest, Korea Resources Corp. said in a statement yesterday. The plant, which will supply about half its output to Posco, may double its capacity starting next year, the company said.
The smelter will help South Korea, Asia's third-largest economy, reduce dependence on refined imports from China and Chile and tap rising demand from steel mills. Global molybdenum prices have increased 25 percent in the past year, according to Metal Bulletin magazine.
"It's a smart move," said Mark Pervan, head of research at Daiwa Securities SMBC, in Melbourne. "There's going to be very strong underlying demand for nickel substitute products like molybdenum and chromium," over the next three to four years, he said.
The new smelter will initially meet 35 percent of domestic demand and save about 130 billion won ($140 million) in imports, the government-owned energy and mineral resource explorer said. The plant will meet 70 percent of domestic demand when it doubles capacity. (Bloomberg)
Importing molybdenum ore is 10 percent to 13 percent cheaper than buying the refined product and the smelter will break even in about five and a half years, said Youn Cheal Hean, a director general at Korea Resources' business development team.
"Global demand for molybdenum is growing 5.2 percent every year, while there is a shortage of smelting facilities," Lee Han-ho, CEO at state-run Korea Resources told reporters on May 11 at the opening ceremony of the plant in Yeosu. "This smelter will enable us to even become an exporter. We plan to export to Japan and Taiwan."
The smelter, a joint venture between Korea Resources and KTC Korea Co., a metals trader, will initially receive 670 tons of molybdenum ore a year from a mine in Uljin, 330 kilometers southeast of Seoul, Korea Resources said. The mine, the only molybdenum mine in the country so far, has estimated reserves of 3.7 million tons. Lee said Korea Resources has plans to explore and develop more mines in the country, without elaborating.
Molybdenum accounts for 1 percent of the volume of the raw materials used to make stainless steel, and 20 percent of the value because of its price. The smelter plans to post sales of 200 billion won next year and double that figure to 400 billion won by 2010, the company said.
China, home to the world's biggest molybdenum deposits, will soon issue licenses and impose quotas on exports of the commodity, Wu Wenjun, general manager of China Molybdenum said in March. The country imposed a 10 percent export tax on ferro- molybdenum from November 2006, after canceling an export tax rebate from January 2005. It also set thresholds for molybdenum plant expansions in January.