Big Time Rebound Set For Moly Sun, Jan 24, 2010 Feature Articles, Moly Articles By Kishori Krishnan
Three months of sitting on the back burner and molybedenum oxide decided enough is enough. Prices for moly, a base metal used to make stainless steel, rose to an appreciable US$ 13.5 per pound and then to US$ 15.5 per pound.
At the end of October 2009, moly oxide was trading just around $10.5. By the end of the year, the price of molybdenum oxide had only risen to $11 per pound.
Reports indicate that as of August 14, 2009, the price peaked to $18 per pound, and then started its downward slide. Earlier, it had hit a low of $7.70 in April.
Reports indicate that major production cuts in both alloy steel and stainless steel saw global demand for molybdenum decline 10.2 per cent in 2009. In stainless steel, molybdenum is used along with chromium to raise corrosion resistance.
Ferromolybdenum, which is hawking between $32 to $33 per kilogram of Mo, has also risen by more than $3 as compared to the end of 2009.
We have a little storm brewing, one US-based trader told AMM. In the third week of January, the traders came in and bought up a lot of material right before the mills came back on-line, which caused some supply tightness. The traders are now in the position to push prices higher.
The question uppermost on peoples mind: Would the price of molybdenum oxide rebound over $18?
Fret not
A JP Morgan analyst has given a clear thumbs up. Analysts led by Michael Gambardella have written in a report that prices are set to rise a massive 55% in the next two years. By the fourth quarter of 2011, moly prices would be pegged to $24 per pound.
Moly inventories remain very lean, they wrote. We also see more sustainability in the recent surge in moly prices compared to the spike this summer, they have said in a report on Canadian molybdenum miner Thompson Creek Metals (TC).
As global industrial output expands, the analysts anticipate prices will climb to $21 by the end of this year and $24 by the fourth quarter of 2011.
Meanwhile, Haywood Securities has predicted that molybdenum prices will increase to US$ 15/lb this year, and $20/lb in 2011, declining to a long-term estimate of $15/lb in +2013.
Looking ahead, we believe global molybdenum roasting capacity, currently at 480 million pounds per annum, is an important consideration, with some (arguably bullish) market commentators forecasting world consumption in excess of 480 million pounds within the next two years, the analysts said.
we expect growing demand fundamentals to dominate the molybdenum market, noting that the current list of greenfields projects lacks a significant number of large-scale ventures to potentially fill the expected supply deficit.
Underscoring this point is Chris Mayer, editor of Agora Financials Capital and Crisis. With moly, there just arent that many quality moly mines or miners out there, said Mayer.
Analysts are also taking a call on Mosquito Consolidated (TSX:MSQ), which is the 100 per cent owner of the as-yet-undeveloped molybdenum deposit.
The company intends to move to a bankable feasibility study for the CUMO project in 2010, which provides a flex point that will either move the stock higher or knock it off the uptrend.
China calling
Chinas appetite for moly is unsiated. This is also set to push demand, given that the current price of ferromolybdenum in the domestic market of China has risen from CNY 138,000 per tonne to CNY 142,000.
Prices have increased CNY 10,000 per tonne from that at the end of last year.
According to data issued by the National Bureau of Statistics of China, in December 2009, China produced 22,660 tons of molybdenum, up by 1.7 per cent versus Novembers 22,280 tons, soaring by 65 per cent than December 2008. he demand for molybdenum in China is forecasted to put a substantial impact on molybdenum prices in 2010, following the same case in 2009. China has suddenly changed in 2009 from the country to export molybdenum as continued for more than 10 years to that to import molybdenum. In line with the strengthened policy to preserve natural resources as adopted by the Central Government of China, molybdenum has been still maintained as the objective material to regulate its exports.
For the full 2009 year, China produced 215,579 tons of molybdenum, an upswing by 17.5 per cent than 2008.
And if there is less moly available for the hungry nation, what is the net result: takeover, merger, acquisition.
Take a look at Moly Mines Limited (TSX:MOL)(ASX:MOL). The firm has announce that Hanlong Mining Investment Pty Ltd received a critical approval from the Peoples Republic of China for Hanlongs US$ 200 million equity and debt investment in Moly Mines.
Under the deal, Hanlong will also provide Moly Mines with an interest bearing US$ 60 million 10-year loan and arrange up to US$ 500 million in finance for the development of Moly Mines Spinifex Ridge project in Western Australia.
Concurrently, Moly Mines is working with Hanlong and PRC domestic banks to secure the US$ 500 million Project Finance Loan Facility.
Spinifex Ridge in Western Australia is the worlds leading undeveloped primary molybdenum deposit. The company has been looking at strategies to finance its development after a downturn in molybdenum prices.
Chinas Commerce Ministry and State Administration of Foreign Exchange still need to approve the project, which will result in Sichuan-based Hanlong owning more than 51 per cent of Moly.
Moly shares rose 2 per cent to 96 cents in Toronto Friday morning trading, while the overall market was lower.
Things are looking good!
T.
MOL Price at posting:
$1.00 Sentiment: ST Buy Disclosure: Held
