Consolidating Leadership in Molybdenum ProductionThu, 10/17/2019 - 11:13
Q: What is the company’s stance on growth and investment given the national and international geopolitical environment?
A: In Mexico, with the new López Obrador government, there is a deep restructuring process in the way the state relates to business and society as a whole. Companies have to adapt to the new way of doing things. But before we can be completely confident and start making new investments, the government has to elucidate, in a detailed way, the direction it will take.
However, we are not discouraged. We are confident that the new president wants the best for Mexico. It is only a matter of waiting and being cautious until a definitive state strategy becomes evident. The new administration is not even a year old, so the current climate of doubt is normal.
Global issues are also playing a role in this regard. Policies contrary to trade, especially the tariff war between the US and China, are impacting global growth and the Mexican economy. Likewise, recent trade tensions between the US and Mexico have affected both countries’ economies negatively. Given these circumstances, Molymex has taken the appropriate measures to retain its place as a top player in Mexico’s mining industry.
Q: Are there any regulatory changes you are hoping to see enacted under the present administration?
A: First and foremost, government is a facilitating entity. That is its main vocation. To do that, it has to have a deep knowledge of the industry. Lawmakers from Sonora have talked about imposing new taxes on mining activities, which shows they do not quite understand mining’s importance for the state they represent. Such taxes would not only impact businesses directly involved in mineral extraction, they would affect other industries, like construction, and the state’s economy as a whole. The present political and social circumstances are not right for considering further taxation.
The pressing need is to strengthen the rule of law in Mexico. Security is paramount. Mining operations take place in far-off areas, often tucked away in the sierra, and the authorities’ reach and response time is less than ideal. Improving this should be a priority.
Q: Molymex is a subsidiary of Molibdenos y Metales, a Chilean company that produces 30 percent of the world’s molybdenum. What is Mexico’s part in this?
A: Molybdenum is a by-product of copper, although there are some primary mines, particularly in China. The world market is about 600 million pounds, of which, about 200 million pounds is produced in China. Chile is another notable producer, with approximately 23 percent of global production. In Mexico, Sonora singlehandedly produces around 5 percent as only Grupo México has molybdenum-producing mines. We buy molybdenum concentrate from Grupo México and by means of heat eliminate sulfur, moisture and oils, we end up with molybdenum trioxide. This is used in special steels, and we sell it in the US, Europe and Asia, chiefly.
Q: What are your near-term plans regarding growth and attracting new clients?
A: Our production is practically sold in advance. Moreover, molybdenum consumption is low in Mexico. Europe uses approximately 150 million pounds a year, while Mexico uses approximately only 8 million. Our strategy in Mexico is to consolidate our preeminent place in the industry by fine-tuning our daily operations and innovating. The world has changed and new technology makes demands on our operating processes. It is not necessarily about spectacular makeovers. A change, even if it is small, is innovative when it produces positive results. I identified a few opportunity areas and, working hand in hand with our people, implemented changes. In the process, I confirmed a common notion that is not always given due importance, namely, that continuously boosting the capacities of workers is the key to success. Thus, we started an in-house business university whose main pillar is innovation. Through this institution, we formed an innovation team that has considerably reduced the need for maintenance services in the plant.