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The firm believes that a “[l]ooming surplus” is likely to keep prices subdued through to 2016. After that, the outlook for the metal becomes a little brighter.
Since then, CPM Group has come forward to say much the same. In its 2014 Molybdenum Market Outlook, released January 12, the firm states that though moly rebounded last year after declining for three years in a row, a “[l]ooming surplus” is likely to keep prices subdued through to 2016. After that, the outlook for the metal becomes a little brighter.
Here’s a brief overview of what the report, which covers a 10-year period, has to say.
Near-term factors
Over the next few months, CPM sees China’s moly export tax as potentially having a big impact on prices for the metal. It points out that while the Asian nation recently opted to maintain its moly export duties until May 2015 — good news for prices in that less supply will be hitting the market — the fact that they may be removed when May rolls around could create “short-term headwinds.”
On the other hand, if policy changes in China instead “increase domestic production costs” for moly, the metal will gain some support. At this point, it’s up in the air.
Looking a little further out, CPM states that over the next five years or so, moly demand growth “is expected to remain moderate.” Meanwhile, “supply growth will continue to hinge on supplies from copper mines that produce molybdenum as a by-product.” With those mines producing more due to “[p]ositive fundamentals in the copper market” and high moly prices between 2008 and 2012, the firm is calling for potential moly supply growth in the medium term.
In that light, it’s clear why the consultancy doesn’t have high expectations for prices just yet.
Long-term factors
However, as mentioned, CPM also has some hope for moly in the much longer term.
Its reasons for positivity are varied. One is that while by-product moly production is currently strong, it likely won’t be in the coming years. That’s because the current price environment has forced cost cutting for major and junior miners alike, with one result being delayed development for “many longer dated copper projects.”
On a similar note, CPM anticipates China’s contribution to global moly production sinking to about 28 percent between 2019 and 2023 — that will be down from an average of 32 percent from 2000 to 2013.
CPM is also positive on moly’s longer-term prospects for demand-related reasons. While there are some threats to demand for the metal, the firm points out in its report that demand from the steel industry could ultimately strengthen on the back of “investments in energy infrastructure and growth in transportation industry, as well as increases in the intensity of molybdenum use in emerging markets.”
The upshot
While CPM isn’t overly positive on the outlook for moly just yet, it seems much more confident in the metal’s prospects towards the latter end of the decade. Certainly some food for those concerned about the near term.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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