Tokyo (Platts)--11Dec2012/524 am EST/1024 GMT

Japan's demand for molybdenum oxide powder is expected to drop 10-15% year on year, end-users of the product said Tuesday, citing weak economies in the US and China and a possible slowdown in the automotive industry.

Japanese moly oxide demand is affected by global automotive, energy pipeline and stainless steel demand, as moly-containing steel is exported for these purposes.

The country's moly oxide imports totaled 29,106 mt over January-October, according to customs data.

There was optimism among some end-users that these major economies may recover by July next year, but they were being cautious and kept their full-year forecast low.

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One major automaker said the company's preliminary demand outlook for 2013 was stable, but moly industry sources, who supply steel to automakers, said they are not as confident as their customers on a stable outlook.

"That is probably because the steelmakers were hit by the slump in automotive related orders since October, following the slowdown in domestic car sales," a steelmaker said. "Domestic car sales are expected to stay weak in 2013 so steelmakers think the current gloom will continue," he added.

The automaker sources do expect domestic car sales to suffer double digit cuts next year, however, they said higher overseas sales will help even that out.

Japanese car sales started to fall after the government subsidy program to support car sales ended in September.

Moly industry sources said the automakers' scenario for better overseas sales is not convincing, as consumer spending does not look promising anywhere on the back of a bleak economic outlook globally.

Industry sources estimate that the Japanese automotive industry consumes 600-800 mt/month of molybdenum oxide and ferromoly, mainly for chrome-moly steel with 0.08-0.3% molybdenum.

Moly demand for steel pipes was also expected to edge down in 2013 from 300-500 mt/month, sources said. Moly demand for stainless, seen to be at around 300 mt/month, is also forecast to stay slow depending on the global economy.

Three consumers, who buy over 200 mt/month, said they were seeing a 10-15% cut in their 2013 consumption volumes.

As a result, the volume of moly oxide purchased next year via long term contracts will decrease accordingly, the consumers said.

Japanese steelmakers, ferromoly plants and trading houses are currently in negotiations for January-December 2013 contract volumes with North and South American producers and other overseas suppliers.

"Around 90% of Japan's annual requirement was on supply contracts, now this ratio has fallen to 70-80%," said one producer, wrapping up the 2013 negotiations. He added that talks with 70% of Japanese buyers were complete.

"My 2013 demand outlook is flat from 2012, as customers secure their minimum requirement on contract and secure the rest from the spot market," he said.

--Mayumi Watanabe, mayumi_watanabe@platts.com
--Edited by Geetha Narayanasamy, geetha_narayanasamy@platts.com

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