China’s voracious appetite for molybdenum since the beginning of 2009 has inflated the price of molybdenum. Current price levels do not reflect the actual consumption of the metal, as the Chinese firms are creating vast surpluses to support and lower the cost of steel production.
Recently molybdenum mining companies stock prices have fallen on fears that Chinese steel demand may be waning, a sign of a slowing recovery.However, most analysis of world markets has steel demand rising through 2012. How will this speculation effect the stock price of profitable molybdenum companies?
Chinese firms now control 30 percent of the world’s Molybdenum reserves. In an effort to control the rising costs of steel production, China may be trying to control other minerals needed for alloys, mainly molybdenum. Also included, a market wrap-up of companies that stand to gain from a resurgence of steel demand worldwide.
After the Chinese agreed to fund two Molybdenum companies last week, Thompson Creek Minerals and Antofagasta PLC are looking for financing for new projects to capitalize on surging molybdenum prices.
Projected growth for steel combined with Chinese firms investing in foreign molybdenum producers could provide investors with unique opportunities at a good value.
Government spending will spark a recovery in steel demand towards the end of the year; but its mark on the molybdenum market will be limited. Demand for molybdenum in China likely will rise 6 percent in 2009, then slip to 52,800 tonnes in 2010 before growing again in 2011.
As the shock waves spread around the global economy; many analysts are starting to hedge their bets on when a recovery will start. In their Global Metal’s Report released this week, Morgan Stanley gave their take on the near future for the molybdenum market.
After holding its ground much longer than other base metals, molybdenum’s price point has given way to the global economic current. The metal was stable in the $32 to $35 a pound range for much of this year; holding its value compared to the price plummet of the other base metals.
Wednesday, June 9, 2010