By Kishori Krishnan Exclusive To Moly Investing News

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The Chinese New Year has brought in good news for moly producers.

In an announcement that is set to benefit several molybdenum producers, the Ministry of Industry and Information Technology (MIIT) in China has published a draft document laying down the thresholds for access to the molybdenum industry. The document was posted for comments on Tuesday and has got the industry in a tizzy.

The draft proposal states that the production capacity of open-pit mines should be no less than 10,000 tonnes per day while that of underground mines should be 5,000 tonnes per day.

It adds that metallurgical companies should have a minimum annual capacity of 5,000 tonnes of molybdenum for industrial use (with the content of molybdenum no lower than 51 per cent), and 50,000 tonnes of ferromolybdenum (which contains at least 60 per cent of molybdenum).

This would tantamount to a major hurrah for moly producers, and turn the spotlight squarely on big producers. The Chinese New Year holidays begin February 14, 2010. As if in tandem, Chinese molybdenum concentrate prices inched up for the second week on speculative buying.

Molybdenum concentrate was trading at 2150-2200 yuan, on Tuesday.

Giving details of the quantities of moly exported and imported by China in 2009, a Tex Report states that the Asian major aggressively imported 40.5 million pounds of Mo in the first half of 2009, and also imported 35 million pounds of Mo in the second half.

China imported 75.5 million pounds of Mo on content base in the calendar year of 2009, a remarkable increase of approximately 12 times as compared with the 6.3 million pounds of Mo on content base imported in the preceding year of 2008.

LME trades

The launch of the molybdenum contracts on the LME has also been a significant development for the metals market.

Given that steel production has increased globally, it has created a demand for specialty metals, positively affecting the prices of all strategic metals including magnesium and molybdenum as well as cobalt, niobium, tungsten, vanadium and titanium.

Molybdenum is a refractory metallic element used principally as an alloying agent in steel, cast iron, and superalloys to enhance hardenability, strength, toughness, and corrosion resistance.

To achieve desired metallurgical properties, molybdenum, primarily in the form of molybdic oxide or ferromolybdenum, is frequently used in combination with or added to chromium, columbium, manganese, nickel, tungsten, or other alloy metals.

The London Metal Exchange (LME) listed its first molybdenum brands for delivery following the plans for new contracts to trade the metal.

The new contracts, which launch on February 22, 2010, are part of a move to list minor metals on the exchange.

The LME contracts for minor metals will reportedly provide transparent pricing and risk management tools for the molybdenum industry.

Steel strong

Another firm checking into the increased demand from steelmakers is Sojitz Corp, Japan’s largest moly trader, which expects to double its sales over the next three years.

“Until some new mine projects start production in 2012 and 2013, the market will see a supply shortage amid increasing steel output,” Kazuyoshi Shioda, general manager of the ferroalloys department, told Bloomberg in an interview. “To achieve the sales target, we are considering some investment in new mining projects in North America and Australia,” he added.

The company plans to increase annual sales to 20 million pounds by 2013 from the current 10 million to 11 million pounds.

Taking a cue on the supply shortage, several moly firms have initiated new programes at their sites. Like Mercator Minerals which announced the commissioning of phase 1.5 at its wholly owned Mineral Park mine in Arizona. Phase 1.5 will take Mineral Park daily production up from a design capacity of 25,000 tons per day to a design capacity of approximately 32,000 tons per day.

“All start up activities are expected to be complete by the end of February and the mill is expected to be at capacity next month,” said Mike Surratt, President and CEO.

Even though the firm’s mill commenced operations in April, Mineral Park produced more than 31 million pounds of copper, 1.9 million pounds of moly and 200,000 oz of silver.

Even Creston Moly Corp (TSX V: CMS.V) has begun its 2010 drill program at its molybdenum project in Sonora, Mexico.

The optimization and drill program is part of a $4 million work program on the El Creston designed to advance the El Creston molybdenum project towards completion of a full feasibility study, the company has said.

And all time favorite, Thompson Creek Metals too has decided to increase its financial flexibility by voluntarily terminating an existing $35 million credit facility.

As of January 29, 2010, Thompson Creek (TSE:TCM) had cash and short-term investments of approximately $507 million and no debt except for outstanding equipment loans of approximately $13 million, the company has said.

Thompson Creek is currently assessing its long-term business requirements for other forms of credit.

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