The TEX Report Topics < Ferro Alloys > Home
HOME >> Topics List >> November, 2007 >> 09 (Fri)
Moly Contract Term In USA For 2008 Changes In Anticipation Of Its Tight Supply
= To Shift To Yearly Contract, To Enlarge Scale Of Yearly Contract As Measure To Ensure Stable Supply
In anticipation of that the world supply situation of molybdenum in 2008 will tighten, many cases to shift contract term for molybdenum purchase to yearly base are coming up as a remarkable phenomenon. Particularly, in the USA market where molybdenum purchase is mainly based on spot contract, the case to change contract conditions is being seen and, furthermore, an extent for stable purchase of molybdenum is being enlarged through the movements to shift contract term for molybdenum to yearly base and also to expand a scale of yearly contract. The yearly contract for molybdenum purchase has been so far thought as Japan's speciality but the method to purchase molybdenum on yearlong base is now enlarging in the market.

The month of November is a time to renew molybdenum contract. Therefore, the parties concerned are strongly interested in the movements on supply and demand of molybdenum in next year of 2008 and it seems to be certain that the demand for molybdenum in 2008 will grow by 5% on an annualized base, corresponding to an increase of approximately 20 million lbs. on Mo content base. The world supply of molybdenum in 2008 will be surely affected by the matters, which molybdenum production in the western countries is hard to increase further and the regulations for exports of molybdenum products enforced by Chinese Government from July of 2007 will no doubt influence on the world situation of molybdenum supply like a body-blow. There is a strong opinion in the market that the regulations for exports of Chinese molybdenum products as mentioned above will deeply penetrate into the supply situation of molybdenum in 2008 rather than that in 2007. Also, a possibility to shrink the quantity of molybdenum as allocated to exports from China has existed.

Under the circumstances, molybdenum on spot contract is usually able to purchase at a lower price than that to be fixed on yearly contract but an expectation to the spot market is retreating. Many of spot cargoes came from China but, at present, the offers for molybdenum products from China have become a small number. As a matter of fact, in the course of the last 1 - 2 months, it has become difficult to obtain an offer for molybdenum from China. This real feeling of the aspect has multiplied an anxiety for spot purchase of molybdenum.

At present, spot prices of molybdenum products are <> ferro-molybdenum : at US$75 - 76 per kg. and <> molybdenum oxide : at US$32.5 - 33.0 per lb. respectively. The highest price of molybdenum oxide in the past years was US$41 per lb. as recorded in April - June quarter of 2005 but the second highest one was US$35.00 per lb. as seen in October - December quarter of 2005. If price of molybdenum oxide would continue to rise further gradually on a basic tone, it should be no wonder that price of molybdenum oxide rises again to a higher level than US$35 per lb. in 2008.

China exported 15,643 tons in material ferro-molybdenum in January - September of 2007, having increased by 8.2% compared with that ( 14,452 tons ) in the same period of 2006, but the monthly exports of Chinese molybdenum products from July and afterwards, when the regulations for exports of molybdenum products from China have been enforced ( allocated 16,000 tons on material base for shipments in the second half of 2007 ), were <> July : 2,097 tons, <> August : 1,306 tons and <> September : 1,622 tons, which decreased in comparison with the pace of 1,800 tons per month exported from China in the first half ( January - June ) of 2007.

A leading producer of molybdenum in the western world is Codelco of Chile. However, Codelco has been continuing to decrease their molybdenum production from 2007 ( scheduled to produce 50 - 52 million lbs. per annum of molybdenum in 2007, decreasing by 20% from that in 2006 ) and an anxiety for Codelco, which will also maintain their molybdenum production in 2008 on a low level, has been felt. However, the parties concerned said that the production activities of molybdenum in 2008 will be known only in December of this year. Even Kennecott of the USA has an anxiety to decrease their molybdenum production in 2008, because this molybdenum producer has been currently mining lower molybdenum contained ore bed.

Under the present situation, which the quantity of molybdenum recovered at copper mines has shared a 80% of the world production, the production activities of molybdenum at copper mines have grasped a key point of molybdenum production. It is true that, being stimulated by the steeply risen price of by-product molybdenum, copper mining companies were on a basic tone to increase their molybdenum production during a period of 2004 to 2006 but an attitude for molybdenum production taken by these companies is going to change. Namely, the matters in question are difficulties to increase molybdenum production and a decrease of molybdenum output in 2007.

For a reference, being encouraged by a sharp rise of prices for molybdenum products, new projects to develop molybdenum resources are being proceeded but many of these molybdenum projects are scheduled to complete in 2010 and afterwards and, accordingly, the projects to start molybdenum production in 2007 - 2008 have been limited.
last modified : Wed 14 Nov, 2007 [10:30]
Copyright (C) 2004 The TEX Report Ltd. All Rights Reserved.