Investors looking to capitalize on the build-up of nuclear power don’t have to rely on uranium projects alone, as massive amounts of molybdenum will be needed for nuclear power reactors to strengthen the steel alloys used in their construction.
While steel production has remained strong in China and North America, the price of molybdenum has remained weak. China became a net importer of molybdenum in 2010, however, on the year the country is a net exporter of the metal. This trend however may be reversing.
Keeping track of the steel market is key for investors with an eye on molybdenum.
The volatility of world markets over the last week has some commodites on a downward trend. Molybdenum, however, is bucking the trend with some impressive gains over the last week.
The price of molybdenum on the LME is down to its lowest level since July of 2010. Weak demand for stainless steel and the summer slowdown in the production of steel are factors. This could represent a bottom for the price as supporting factors come into play in the coming months.
Ken MacDonald Vice President of Business Strategy and CFO Erdene Resource Development discussed the factors controlling the current molybdenum market.
Molybdenum is increasingly being favored by scientists looking to create cheap and efficient hydrogen power.
The latest five year plan from China limits the production of many base metals in including molybdenum. China the world’s largest steel producer may find itself importing more molybdenum as a result.
Japan will need massive amounts of steel to rebuild what the tsunami washed away. Infrastructure and new automobiles will pave the way for steel demand in the country. While the events in Japan are horrific and depressing, and may affect global markets for quite some time, the need for steel will likely use up a large portion of the surplus that is currently holding down the price of moly.
The Continental Divide region is arguably the world’s most important moly producing deposits. At full production, these deposits could have a serious impact on world molybdenum supply.
Thursday, December 15, 2011