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2014 was a quiet year for the moly space, though December brought two interesting pieces of news. Looking to the future, those hoping to see a stronger moly market in 2015 may end up getting that wish in the short term, but perhaps not in the long term.
A quiet year in the molybdenum space was turned upside down in December as two big pieces of news hit the market.
The first was Thompson Creek Metals Company’s (TSX:TCM,NYSE:TC) announcement that at the end of 2014 it will suspend operations at Endako, a moly mine it has a 75-percent interest in. The company has long been saying that its Thompson Creek moly mine will go on care and maintenance at that time, but the news about Endako surprised market participants given Thompson Creek’s previous optimism about improving profitability at the operation.
The second piece of news came courtesy of China, which according to Platts appears to have pushed back the cancelation of its moly export tax. Originally expected to be canceled on January 1, 2015, the date is now rumored to have been moved to May 1, 2015.
Both reports help provide a picture of the moly market in 2014, with the first highlighting the price situation. Thompson Creek cited “prolonged volatility in the molybdenum market” as its reason for suspending Endako, and indeed the moly price hasn’t had a great time this past year. Though 2014 got off to a promising start, with moly oxide prices hitting a 21-month high of $13 per pound back in April, since then the situation has soured — last week, the Platts daily dealer moly oxide assessment came in at $8.95 to $9.15 per pound, and earlier in the month it was down at $8.95 to $9.05.
Meanwhile, China’s plan to delay the removal of its moly export tax is a reminder of a key moly market event that took place in the first half of the year: the World Trade Organization’s (WTO) ruling that Chinese export restrictions on moly, rare earths and tungsten are not consistent with its obligations as a WTO member. While at the time the news had little impact on the moly market, some said that once the tax was actually removed there could be some reaction — now it looks like any impact will be delayed further.
Other 2014 highlights
Compared to those updates, other 2014 moly market happenings pale in comparison. Nevertheless, here’s a look at a few other key moly-related events that took place this past year:
- Molybdenite innovation: Molybdenum disulfide, also known as molybdenite, has been garnering a fair amount of interest in the tech space this past year as researchers use it to improve digital cameras, sodium-ion batteries and more. The material, which is 2D and only a few nanometers thick, was once considered a possible rival for graphene, and though the shine has come off it a little in that respect, researchers are working hard to find out which applications it is best suited to.
- Moly-99 shortage: Moly-99, one of molybdenum’s 35 known isotopes, doesn’t get a lot of attention, but some in the industry are starting to think that it should. Their belief stems from the fact that moly-99′s delicate supply-demand balance has been thrown out of whack in recent years. That’s a problem because its decay product, technetium-99m, is a key component of nuclear medicine, a branch of medicine that uses radiation to diagnose illness — a shortage of the material could thus cause problems for medical facilities and of course patients. Most recently, 11 countries banded together to present a joint declaration to the Council of the Organisation for Economic Co-operation and Development; it urges the development of new infrastructure to replace the current ageing moly-99 production facilities.
Both of those areas will be interesting to keep an eye on moving into 2015.
Moly in 2015
Those hoping to see a stronger moly market in 2015 may end up getting that wish in the short term, but perhaps not in the long term. As one South Korean trader told Platts, China’s delay in removing its moly export tax “means that we may see higher moly prices in the global market for the first half of next year at least as no large quantity of legitimate Chinese supply will be appearing in the market.”
However, the news outlet also points to the possibility of new Chilean mines negatively impacting the moly price. One to watch will be Sierra Gorda, a joint venture between KGHM International, Sumitomo Metal Mining (TSE:5713) and Sumitomo (TSE:8053). It’s currently in the commissioning stage, though that is expected to be complete by the start of 2015, and will reportedly produce 120,000 tonnes of copper, 50 million pounds of moly and 60,000 ounces of gold per year.
On the bright side, the much longer-term outlook for moly looks promising. A recent report out of China suggests that the country’s moly consumption will hit 120,000 tonnes in 2015, reaching 135,000 tonnes by 2020. And though supply is also expected to rise, the report concludes that a healthy increase in both supply and demand could lead to “a price rebound by [2020].”
In terms of what investors should be doing in the meantime, Shaun Dykes, president and CEO of American CuMo Mining (TSXV:MLY,OTCQX:MLYCF), said in response to a survey that the current state of the market should be considered an opportunity. “These stages in the metal cycle provide by far the best opportunities for those that are willing to do their homework. Valuations and prices are at ridiculous lows,” he elaborated, adding, “in mining, look for companies that have deposits that are potential low-cost producers in their metal.”
Heading into the new year, his company will be working on confirming its Idaho-based CuMo project as “the lowest-cost producer in the primary molybdenum market with large quantities of associated copper and silver.” It will also “start the path to feasibility with a drill program and continue environmental baseline work.”
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Related reading:
Thompson Creek to Suspend Endako Mine on Moly Price Weakness