freeport cuts molybdenum output, may cut coppe

http://www.reuters.com/article/marketsNews/idUSN1044863720081110?rpc=401&=undefined&sp=true

UPDATE 3-Freeport cuts molybdenum output, may cut copper
Mon Nov 10, 2008 12:32pm EST
By Euan Rocha

NEW YORK, Nov 10 (Reuters) - Freeport-McMoRan Copper & Gold Inc (FCX.N: Quote, Profile, Research, Stock Buzz) said on Monday it would cut molybdenum production and may cut output of copper due to weak demand and prices, but its shares rose after China announced a huge stimulus package.

Prices for base metals like copper and minor metals including molybdenum have collapsed in recent weeks on mounting concerns about the health of the world economy.

However, prices for copper and other metals rallied Monday after China announced a $586 billion economic stimulus plan, helping to push up Freeport's shares by as much as 11 percent before giving up much of that gain.

Freeport, the world's biggest publicly traded copper producer, said it was preparing revised plans at each of its copper operations to reduce costs and capital spending.

The company said it would provide an update on its revised operating plans in December.

Charles Bradford of Bradford Research/Soleil said the Chinese stimulus package was important, but cautioned that the plan was unlikely to be a quick fix.

"When you try to stimulate infrastructure building it's not instantaneous," said Bradford. "Even if you have projects, just to put them out to bid takes months."

The Chinese stimulus plan, which sparked a rally in base metal prices, will be focused largely on infrastructure and social projects. [ID:nLA280734] [ID:nN09395080]

In the meantime, Freeport said it would cut molybdenum production from its Henderson mine and defer the restart of its Climax molybdenum mine. Both mines are in Colorado.

Slowing demand for molybdenum in the metallurgical and chemicals sectors, coupled with weak global economic conditions and turmoil in credit and financial markets, has hurt prices for the metal, the Phoenix-based company said.

Freeport will cut annual production at the Henderson mine, one of the largest primary molybdenum-producing mines in the world, by about 10 million pounds, or 25 percent of capacity.

The company said it would also look at curtailing output at other mines that produce molybdenum as a by-product.

"Whenever demand for a product falls it makes sense to cut production, so that you can balance supply and demand," said Bradford. "Molybdenum is used for steel making and we've had steelmakers all over the world announce pretty massive production cuts."

The Metals Week molybdenum dealer oxide price was $12 per pound on Monday, down from about $30 in mid-October, Freeport noted.

Molybdenum, which has the ability to withstand extreme temperatures without significantly expanding or softening, is widely used in the manufacture of aircraft parts, electrical contacts, industrial motors and filaments.

"We have a positive, long-term view for molybdenum markets and will be positioned to increase our production as market conditions improve," Chief Executive Officer Richard Adkerson said in a statement.

Freeport reported a sharp fall in third-quarter profit last month and said it would curtail planned mine expansions.

Other mining companies are also cutting back. Brazilian mining giant Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz), for example, said recently it would cut iron ore output 10 percent due to weakening demand.

Earlier on Monday, Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz), the world's second-largest iron ore miner behind Vale, also said it would cut its 2008 iron ore shipments from Australia by 10 percent. [ID:nSYD405752]

Freeport's shares were up 3.8 percent at $28.10 in midday trade on the New York Stock Exchange after hitting a high of $30.19 on the China stimulus news.

China is the world's biggest importer of copper. (Reporting by Euan Rocha; editing by John Wallace, Ted Kerr and Leslie Gevirtz)