Molybdenum Market Showing Signs of Recovery

Producer General Moly reported a net loss of $2.2 million in Q3, but CEO Bruce Hansen is optimistic about the company's future.

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General Moly (TSX:GMO,NYSEMKT:GMO) reported a net loss of $2.2 million for the three months ended September 30, 2017, or a loss of 2 cents per share.

However, company CEO Bruce Hansen expressed optimism about the future in a Monday (November 6) release, and said the company is “well positioned for the continuing gradual recovery of the molybdenum market.”

Hansen noted that steel demand in China and worldwide has “rebounded strongly in 2017.” In fact, stainless steel demand rose 14.5 percent year-over-year in Q1, reaching 11.8 million tonnes, according to the International Stainless Steel Forum. About 80 percent of molybdenum is used in stainless steel.

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“In the United States and around the world, oil and gas drilling activity requiring moly-reinforced steel has bounced back to over 2,000 operating rigs, a level last seen two years ago,” Hansen continued. “While the fourth quarter typically reflects lower molybdenum demand from steel producers during the winter, we believe we will continue to see higher quarterly highs and lows in the molybdenum prices in 2019.”

According to the company, US molybdenum oxide prices have gained 29 percent since the start of 2017 to hit a mid-October price level of $8.65 per pound. Molybdenum oxide prices stood at $6.70 at the end of 2016, and as of November 6 molybdenum oxide prices were at $7.26.

Molybdenum supply and demand

According to data released by the International Molybdenum Association in late October, global molybdenum production came in at 144.3 million pounds in Q2 2017. That’s up 13 percent from the previous quarter and up 18 percent from the same period in 2016.

The organization notes that South America overtook China to become the world’s largest molybdenum producer during the period, putting out 53.2 million pounds of the metal. China’s molybdenum production came in at 51.8 million pounds, up 14 percent from the previous quarter. Molybdenum production in North America increased by 1 percent from Q1 to Q2 this year to come in at 30.3 million pounds.

US demand for molybdenum increased 7 percent from Q1 levels to reach 14.8 million pounds in Q2 — that’s the highest increase compared to the other areas. Europe experienced the second-largest gain in Q2 with an increase of 2 percent. Demand fell 1 percent in Japan to hit 12.8 million pounds, while usage in the Commonwealth of Independent States rose 5 percent, to 4.9 million pounds.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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