Industrial Metals

Prices are set to follow an upward trend in 2010. Prices for oxide are forecast to average US$ 17/lbMo, rising to above US$ 20/lbMo in 2011, as strong demand willl ensure producers follow suit and hike prices.

By Kishori Krishnan Exclusive To Moly Investing News

This is the month when things will start to move for moly. The London Metal Exchange (LME) is set to commence futures trading of molybdenum in February 2010, as part of its move to list minor metals on its exchange.

Prices are set to follow an upward trend in 2010. Prices for oxide are forecast to average US$ 17/lbMo, rising to above US$ 20/lbMo in 2011, as strong demand willl ensure producers follow suit and hike prices.

Analysts insist that a deficit could appear in the market by 2014, taking prices to US$ 40/lbMo.

Why is this set to happen? In 2009, global mined molybdenum output is estimated to have declined by 12 per cent, following annual average growth of 5 per cent for the period 2000 to 2008.

Surpluses in 2008 and 2009 have all been absorbed by stockpiling, mainly in China. And reports indicate that the only new roasting plant outside China that is likely to be constructed in the short to medium term is that by Molymet at Mejillones in Chile, which is expected to raise world capacity to more than 270 ktpy.

However, there could still be localised shortages. As market research firm Roskill notes: “…consumer demand for molybdenum in steel for process and power plants, as well as in oil and gas projects, will keep the market tight. Any increase in supply from new producers will depend on increased availability of project finance.”

What will push up prices though is the clear indication that economic recovery is underway. According to PricewaterhouseCoopers’ (PwC) 13th Annual Global CEO Survey, the world’s economic leaders are more optimistic about the future than they were at this time last year. The most optimistic of all were Canadian CEOs.

Many Canadian CEOs attest that non-ferrous metals are enjoying even better results: Nickel is up 86 per cent; copper is up 136 per cent; aluminum is up 52 per cent; zinc is up 112 per cent; molybdenum oxide is up 57 per cent and lead has risen 130 per cent. There have been some price declines among minor metals and uranium, but the general trend is toward stronger prices.

At the end of the month though, Chinese molybdenum concentrate prices fell slightly due to a trading slowdown, reports said. Prices took a further tumble in the last week on lower consumer demand and lower raw material costs.

Chinese molybdenum concentrate prices fell another 50 yuan 7 on January 29, after losing 100 yuan on Tuesday as steel mills lowered their demand.

Raw material costs have pushed average steel prices higher. Reports indicate that purchasing activity in the United Arab Emirates is unlikely to rebound before the final quarter of this year.

Demand in Abu Dhabi is forecast to be more upbeat than in Dubai. And in both locations, bearish end-users and traders are only procuring material on a requirement basis. Restocking is a rarity.

Moreover, in India flat and long product prices have been volatile all-January. Both major and secondary producers have priced their finished steel products according to the movement in input costs. The early higher quotations were viewed as speculative. Values have since fallen back incrementally toward December levels, analysts said.

Incidentally, Australia-based molybdenum major Moly Mines Ltd (ASX/TSX: MOL), listed on both the ASX and TSX, has said that the People’s Republic of China has cleared its state-owned Hanlong Mining Investment Pty Ltd to purchase US$ 140 million in Moly shares, and supply a 10-year US$ 60 million loan.

Steel firm

The world’s No.4 steelmaker South Korea’s Posco has said it would raise prices of its stainless steel products by up to 3.3 per cent due to rising raw material prices. The firm last raised its stainless steel prices in September.

It said prices of hot-rolled stainless steel product would rise to 3.15 million won ($2,731) a tonne from 3.05 million won and cold-rolled product would also increase by 100,000 won to 3.42 million won.

LME story

The refractory metallic element used principally as an alloying agent in steel, cast iron, and superalloys to enhance hardenability, strength, toughness, and wear and corrosion resistance will now be traded on the LME.

Though mixed views remain in the molybdenum market over the introduction of futures trading, market conditions for molybdenum oxide and ferro-molybdenum look set to improve in 2010.

The plan to turn molybdenum into an exchange traded commodity has brought in a mixed opinion from several quarters.Many producers and consumers have voiced concerns that prices will become more volatile as a result, while others have welcomed the news.

Some analysts insist the metal will make a “massive comeback” if for no other reason in that the price has hit its 5-year low, and the arrival of the new futures contract is set to bring in more market transparency and market participation.

The contract is to be priced in US dollars.

Mining hit

Depressed prices have also put the Australian-focused Thor Mining in a wait-and watch mode.

The firm has said that low molybdenum and tungsten prices, along with the strength of the Australian dollar against the US dollar, have further delayed development its Molyhil project.

Thor Mining (AIM, ASX: THR) has also informed that it plans to raise A$250,000through a placing of 16,666,667 new ordinary shares. The funds will be used to evaluate new projects to supplement the Molyhil tungsten and molybdenum project in Australia.

The firm did not explore during the December quarter, though it has initiated a search for new exploration projects focusing on gold and base metals.



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