Industrial Metals

Analysts are bullish for the future of the molybdenum market stemming from growth projection in China. Steel demand, and consequently, demand for moly is expected to grow by 9 percent through 2012.

By Michael Montgomery—Exclusive to Moly Investing News

Molybdenum prices have fallen slightly since the $18 highs of April down to approximately $15 per pound; however, demand for the metal remains strong. The future price for the metal will be affected by the mining quota in China for 2011. The Asian nation mines about 35 percent of the metal, and consumes a large portion of moly in the production of steel alloys. In the second quarter of 2010, China became a net exporter of the metal after being a net importer for 2009. The robust buying of moly on China’s part help the metal rebound after the $8 lows of 2008.

“Between 2009 and 2012, consumption of molybdenum, an ingredient in making steel, is set to grow by 9.2 percent… Re-stocking of steel could lead to mine re-starts, with Chinese production rising over 11 percent this year,” stated Catherine Virga, director of research at CPM Group, at a London Metal Exchange conference.

The level of growth in the steel market is in line with the projections for the growth of Chinese GDP as a whole. This may be due to large scale construction projects and the heavy use of steel in the rapid urbanization of the Chinese society as a whole.

The amount of investment in overseas moly mining operations on the part of Chinese investment firms foreshadows the bullish nature of the Chinese for future steel demand, and consequently demand for moly. After the stockpiling of moly in 2009, Chinese firms have backed off in 2010, slowly working down the stockpiles. Analysts see the demand for moly starting to grow in the second quarter of 2011.

Molybdenum, unlike some other base metals trades on supply and demand fundamentals, as investors have yet to be drawn to it as a speculation play. However, with the addition of moly to the LME in 2010, investors are making up a smaller portion of the market, adding a new dimension to the market.

“The contract is still gaining traction and at this point of very low levels of liquidity I do think we’ll have investors still be a bit stand offish from the LME contract in the near term.  Over time the molybdenum contract is one that could potentially be more liquid than the tin market and opening it up to much greater levels of investment demand,” stated Catherine Virga, in an interview with Geoff Candy, of MineWeb.

While the LME contracts may take time to significantly affect the moly market as a whole, in the long run it remains a positive addition to the demand for the metal, without the concerns of rampant speculation that cloud other metal markets.

Moly Company News

 

Ivanhoe Australia (ASX:IVA) is looking for a listing on the Toronto Stock Exchange in an attempt to broaden its investment universe. The Australian firm’s parent company Ivanhoe Mines Ltd. (TSX:IVN)(NYSE:IVN) is already listed on the Toronto exchange.

“For molybdenum producers we just don’t have many comparables in Australia and the big institutions holding our shares have said we should get an improved valuation in North America because there’s a more active capital market,” stated Ivanhoe Austraila’s Chief, Peter Reeve.

The company hopes that the gained exposure in the North American market will help boost capital and accelerate the mining operation in Australia. The company plans to keep its headquarters in Australia as well as their list on the Australian exchange.

Avanti Mining Inc. (TSXV:AVT) which is developing it Kitsault mine in British Columbia has recently signed an off-take agreement. The company “entered into an off-take agreement with an Asian steel producer for the sale of three million pounds of moly annually for four years if Kitsault is re-opened,” reported J. McKay for Business in Vancouver.

The Kisault mine is expected to cost $600 million to build, and the company has not secured any of it until this recent announcement. The name of the partner has yet to be announced until the letter of intent is signed. The final feasibility study is to be released Jan. 31, 2011.       

With help from Assistant Editor Vivien Diniz

MARKETS

Markets
TSX20051.11+59.23
TSXV674.73+1.71
DOW33469.29+132.62
S&P 5004233.18+25.91
NASD12893.52+113.61
ASX7071.00+78.30

COMMODITIES

Commodities
Gold1792.38+3.39
Silver20.48+0.22
Copper3.65-0.06
Palladium2249.11-26.89
Platinum955.11+0.11
Oil91.96-2.38
Heating Oil3.52+0.03
Natural Gas8.79-0.08

DOWNLOAD FREE REPORTS

×