molybdenum price , page-13

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Molybdenum falls to lowest since March 2004, nears break-even levels for producers
By Martin Hayes - Chief Correspondent, [email protected] (+44 (0)20 7929 6339)

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London, 07 November 2008 - Molybdenum prices were languishing around their lowest for over 4-1/2 years on Friday, having suffered a catastrophic decline in recent weeks, which has brought MO3 (molybdenum oxide) down to near cash production cost levels.

"Up to September, it had withstood the big (commodity) sell-off and was over $30 a pound - now we are hearing it is $12," Tony Warwick-Ching, principal consultant at CRU's Steel Raw Materials Unit said this week at a Metal Bulletin Ferro-alloys conference.

MO3 is currently around $13.00/16.00 a pound, having lost some 55 percent from late-summer levels above $32.00 that prevailed before the financial crisis and credit crunch caused a meltdown in global markets.

FEMO (ferro-molybdenum), meanwhile, has slumped some 62 percent from around $77.00 a kilo at the start of October to a current $26/32.

FEMO is one of the noble alloys -- ferro-vanadium is another -- and it is used in steel manufacturing. But steel producers around the world have made production cutbacks of some 30 percent or more, meaning that demand for noble alloys has fallen as well.

Would-be buyers have trimmed back on their requirements for the final quarter of this year, with many renegotiating or even cancelling contracts, resulting in an unexpected build-up of molybdenum, which has tilted the market towards surplus.

"The market was in balance and continued through until the third quarter this year. For 2009 and 2010, it was thought earlier this year that the market would be in balance or a small deficit. Now - that is not the case and we shall have to see in 2009," Barbara Buck, Vice-President Global Sales and Marketing at Climax Molybdenum said at the same conference.

MO3 consumption in 2007 was around 470 million pounds, which was close to supply of some 468 million pounds, she said.

CRU's Warwick-Ching said that the market had now moved into surplus, which was likely to grow.

"In 2008 it (surplus) will be 12 million pounds, and we estimate 22 million pounds in 2009," he said.

Production restraint seems likely, given that cash costs are in the $10-12 region in the West, although in China they can be as low as $4.00. However, molybdenum is mostly mined as a by-product of copper. So cuts may well depend on copper producers taking action.

"We are entering into a lower (price) cycle for copper, so it will be be interesting to see if there is lower by-product molybdenum as well," Buck said.

Copper, which was as high as $8,940 a tonne in July, fell as low as $3,590 on October 27, its weakest for three years. It is now just above $3,900 -- cash costs are in the $3,500/4,000 area.

For molybdenum, the market may be nearing its floor now -- $10/12 may be the low-point as it has hit the production cost curve.

"It will be mildly supportive if marginal copper producers cut production. But in a bear market that will only hold prices stable," Warwick-Ching said.

"Once it has stabilised, the buyers will come back and that could start to lift prices. But back to $35.00/40.00? - I don't think so," he added.

Molybdenum saw a meteoric price move in 2005. FEMO, which for most of the early 2000s was stable around $8.00 a kg, soared as a result of cutbacks and disruptions in copper production and hit record highs of $100. MO3 touched peaks of around $40 at that time.
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