Molybdenum Market Stuck in Neutral

By Melissa Pistilli — Exclusive to Moly Investing News

Molybdenum Market Stuck in Neutral

The spot price for molybdenum oxide has risen to over $14/lb in the last few weeks, and some traders are anticipating a move toward $15/lb in the short term. Prices for the industrial metal have yet to recover from the 2008 crash, when the market experienced highs of $35/lb. This time last year, molybdenum oxide was fetching $17 to $17.50/lb.

Annual demand growth for moly, a critical component in steel fabrication, is forecast at three to four percent over the next decade. China Molybdenum Co., Ltd. (HKG:3993), China’s largest moly producer, has announced plans to launch an IPO of nearly $600 million - ten percent of its enlarged capital – in Shanghai. The financing will help fund the advancement of its moly and tungsten projects in anticipation of growing demand from China’s stainless steel and construction steel markets.

Despite rising demand, industry insiders expect prices to hold steady at around $15/lb and not exceed $20/lb until 2020 as the market battles a severe supply overhang brought on by the boom in global copper mine production. Currently, molybdenum as a by-product from copper mines accounts for 60 percent of total global moly production, said Ionut Lazar, senior consultant at CRU Strategies. Codelco, the world’s largest copper producer and a leading molybdenum producer, is joining with Antofagasta (LSE:ANTO) to explore for copper and molybdenum in Northern Chile.

According to a MolyWorld survey, China – the world’s largest molybdenum producer, with over 170 moly mining companies – had an excess supply of 8,000 MT of molybdenum in 2011.

Speaking at the eighth China Molybdenum Annual Conference, Lazar said “[t]he days of $30/lb are gone. If the market tightens, if stainless steel recovers at the end of the year and traders are not responsive to this demand, price may jump. But it will not sustain over $20/lb. The price will stay at $12-17/lb in foreseeable future,” reported independent industry news agency Platts.

In 2007, China implemented a 15 to 20 percent export tax on molybdenum products and an export quota limiting annual exports to 25,000 MT. Industry leaders report that due to the supply overhang in domestic molybdenum resources, the Asian nation is not likely to tighten export rules any time soon; in fact, a loosening of restrictions is possible. For now, export numbers are down nearly 41 percent for the first two months of this year. Perhaps traders are hoping for better prices.

Company news

Origo Partners plc (LSE:OPP) recently announced that Moly World Ltd. (a Mongolian-based resource company in which Origo owns a 20 percent equity stake) has completed a maiden JORC-compliant resource estimate on its Mandal Moly molybdenum and tungsten project in Mongolia. The results equate to a total resource of 203.4 MT of ore grading 0.1261 percent molybdenum, with total contained molybdenum metal of 256,000 tonnes. Moly World plans to conduct further drill work on the property this year in an effort to extend the resource. According to reports, the high-grade, near-surface resource could potentially produce about 27 million pounds of moly equivalent per year, which would make Moly World one of the largest primary producers of the metal.

Augusta Resource Corp. (AMEX:AZC,TSX:AZC) has received a key environmental permit for its Rosemont copper project in Arizona. The property boasts reserves of approximately 5.2 billion pounds of copper and 161 million pounds of molybdenum. Slated to commence production in 2014, the mine is expected to produce around 220 million pounds of copper and 4.7 million pounds of molybdenum over its 21-year projected life.

Taseko Mines Ltd. (TSX:TKO,AMEX:TGB) announced that 2012 first quarter production at its 75 percent owned Gibraltar mine in South-Central British Columbia reached 438,000 pounds of molybdenum. “We anticipate returning to more normalized concentrator throughput levels this quarter. Molybdenum recovery continues to improve quarter-over-quarter and we expect copper recoveries to stabilize at approximately 89%,” said Russell Hallbauer, President and CEO of Taseko.

 

Securities Disclosure: I, Melissa Pistilli, hold no interest in any of the companies mentioned in this article.