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.
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.
Growth for steel demand in China is expected to dip below 10 percent for the first time in recent years. Growth in the steel market, and consequently growth for moly is expected to improve, however, at a slower pace than in recent years. These factors may influence moly price in 2011.
Projected growth for steel combined with Chinese firms investing in foreign molybdenum producers could provide investors with unique opportunities at a good value.
A draft proposal by the Chinese government that lays down the thresholds for access to the molybdenum industry is set to cheer moly producers.
Molybdenum prices are currently hovering around the $9 per lb mark, a drastic decline from last Augusts’ high of $34. Molybdenum managed to hold its price point longer than other metals; but in the fourth quarter of 2008 the steel industry’s defeat sent molybdenum on a free fall.
In 2008, molybdenum cost an average of $29/lb after peaking at $30 in 2007. On a monthly basis, however, molybdenum has sold for less than $10/lb for two months now. Investment bank Dahlman Rose & Co. in New York expects molybdenum to average $12/lb this year.
Wednesday, October 5, 2011