[Ferro-Alloys.com] At least two Japanese steelmakers are believed to have exercised their term options to increase contract volumes of molybdenum oxide for the third quarter as steel demand from the automotive sector rises, Japanese traders said Friday.

 

Some mills have asked for additional shipments of two to four cargoes of moly oxide for delivery over July-August, traders said. Moly oxide demand for specialty steel used to make automotive components has been improving in recent months, trade and mill sources have said.

 

Japanese steelmakers typically have annual term contracts for moly oxide running from April-March, with a minimum requirement to lift one cargo each month, and an option to take delivery of another two to four parcels each quarter. Each cargo comprises 20 mt of moly oxide.

 

"If my customers need more moly oxide [for Q3], they will have to buy from the spot market as they have reached their limit [on the term contract]," said one Tokyo-based trader.

A second Tokyo-based trader said he had "several customers" who have already exercised fully their option to increase Q3 volumes.

 

"We are currently fixing delivery volumes for August and they have bought all they can for this quarter," said the second trader.

 

But the traders said their customers are not looking to sign new term contracts or revise the contract terms for October-December, as the steel market outlook remains uncertain. Volatile foreign exchange rates is one reason for the uncertain steel market outlook beyond the third quarter. Steel demand for shipbuilding has remained dull, and while some Japanese stainless steel producers have reported an increase in orders from overseas, other mills have yet to see such a pickup in demand.

 

Japan imported 2,753 mt of moly oxide in May, up from 2,530 mt in April and 2,137 mt in March, according to Japanese customs data. Over 80% of moly oxide imported into Japan is believed to be on term contracts, market sources have said.

 

Separately, a third Tokyo-based trader said one customer had fully utilized Q3 term options for nickel imports, due to stronger-than-expected demand for stainless steel.