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General Review Of Molybdenum In 2008 And Its Outlook For New Year
= New Projects To Develop Moly Mines Have Been Postponed For Difficulties To Foresee Its Future Market
Molybdenum prices have unexpectedly fallen to a considerable extent during October to December of 2008. The market price of molybdenum oxide as of the end September of 2008 was still maintained on a level of US$30 per lb. of Mo but fell to US$9.50 on the end December of 2008 as a lower level than US$10 per lb. of Mo. It was so far viewed that the supply situation of molybdenum in 2009 would be maintained on a tightness and molybdenum prices were thought to continue on a firm tone. The reason was that new molybdenum projects to shake substantially its supply situation in 2008 to 2009 were not seen.

It was anticipated that new projects to develop primary molybdenum mines or copper-molybdenum mines were scheduled to commence its operations from 2010, causing to increase molybdenum production and to relieve the supply, and the steeply risen molybdenum prices would be resolved gradually. Namely, the so-called softlanding was forecasted as a usual course.

An unexpected collapse of molybdenum prices has been closely connected with a crisis of financial markets emerged from October of 2008. A sharp fall of molybdenum prices started from October and its trigger is due to the sales of molybdenum stocks held by dealers and convertors, who have intended to strengthen their cash flow in preparation for a crisis of financial markets. Incidentally, by reason of having reduced steel production, ArcelorMittal in Europe has delayed to fulfill or cancelled the existing contracts and many of European steel companies have followed this countermeasure.

In order to cope with a fall of molybdenum prices, major molybdenum producers have taken the countermeasures to reduce their molybdenum production with a comparative rapidity but its impact was still not enough to bottom out molybdenum prices. Freeport-McMoRan of the USA announced in November of 2008 that (1) the Henderson primary mine reduces molybdenum production by 10 million lbs. per annum and (2) the Climax opencast mine defers its resumption project by 12 months (initially scheduled to restart molybdenum production from 2010 and to produce 30 million lbs. / year). In addition, Freeport-McMoRan announced in December that the sales of molybdenum planned for 2009 are shrunk (to decrease from 80 million lbs. / year to 70 million lbs. / year) and also the sales in 2010 to 2011 will be reduced.

Following the announcements by Freeport-McMoRan, Thompson Creek Metals of the USA also announced that (1) new project to develop the Davidson primary mine in British Columbia province of Canada (planned to produce 5 million lbs. / year from 2010) is postponed to complete and (2) the project to expand the capacity at the Endako primary mine in British Columbia province of Canada is deferred. Furthermore, Adanc Molybdenum of Canada has planned to develop the Ruby Creek molybdenum mine in British Columbia province (scheduled to complete in 2011 with annual capacity of 13.0 million lbs.) but this project has been suspended and the company is moving to look for new financial supporters and buyers. Codelco of Chile, a major producer of molybdenum in the world, announced that the output of molybdenum in concentrate in 2009 is planned to be reduced to 45 million lbs. / year from 50 - 55 million lbs. / year produced in 2008.

However, even the countermeasures adopted by molybdenum producers in the western world to decrease molybdenum production were so far unable to exhibit a substantial effect to bottom out molybdenum prices, because price of molybdenum oxide at the end December of 2008 had fallen to US$9.5 per lb. of Mo, having broken a level of US$10. When a major molybdenum convertor came to Japan in December of last year, they said that the quantity of molybdenum in concentrate to be produced in the western world for 2009 is estimated to come to 294.0 million lbs. as decreased by 24.8 million lbs. from that for 2008, but the circumstances in 2009 have been still confused and the world demand for molybdenum is unable to guess at all.

An analyst said that the quantity of molybdenum to be supplied in 2009 is anticipated to have an excess of 14 million lbs. on an annualized base, and there is a strong view in the market that it has to be necessary to reduce further molybdenum production in 2009 by 10 million lbs. per annum.

China is a powerful source to supply molybdenum to the western world and the molybdenum supply from China had once shared 15 - 25% of the whole supply in the past years but, owing to the regulations for exports of molybdenum products enforced from July of 2007 by the Central Government of China (to allocate quantities for exports and to qualify producers and exporters), the quantities of molybdenum products to be exported from China have been restricted. According to the quota announced twice by Chinese Government, the total quantity of molybdenum allocated to be exported from China in 2008 came to 36,872 tons on material base (corresponding to approximately 25,500 tons on Mo content base) and the actual quantity of molybdenum exported from China in 2008 had matched this allocation.
Also, the Central Government of China already announced the first allocation for exports in 2009 and the quantity has come to 24,912 tons on material base, consisting of <> primary molybdenum materials : 30,310 tons (compared to 23,711 tons as the first allocation for 2008), <> processed molybdenum products : 2,307 tons (3,179 tons for 2008) and <> finished molybdenum products : 2,295 tons (3,039 tons for 2008).

A potential menace to molybdenum market by China is an anxiety for the accumulated huge stocks of molybdenum in China, which have been created by the considerably increased production of molybdenum in China for the steeply risen prices of molybdenum in the world for the last 2 - 3 years and the regulations for exports of molybdenum from China. According to an estimation, China is thought to have stocked 19 million lbs. of molybdenum. The matter in question is from when do these excessive molybdenum stocks rush into the western market as breaking a dam. In line with the policy to ensure domestic stocks of material resources, the Central Government of China has regulated molybdenum exports at present but it is not negligible to see a possibility, which the circumstances in China will change. After a crisis of the monetary markets has emerged, China has been progressing to reduce steel production and a possibility to relieve the supply situation of molybdenum is anticipated to come up.

Also, it is questioned how extent are new molybdenum projects proceeded in the USA, Chile, Peru and Australia until autumn of 2008 influenced by a crisis of the financial markets arisen in this time and a whole picture of this problem is still not cleared yet. Naturally, these new molybdenum projects are in the direction to defer to develope but Merector Minerals of the USA has entered from December of 2008 into the operations at the Mineral Park copper-molybdenum mine in Arizona State of the USA. This new projects has been designed to produce 56.4 million lbs. per annum of copper, 10.3 million lbs. per annum of molybdenum in concentrate and 0.6 ounces per annum of silver.

Both factors of a difficulty to foresee molybdenum supply and an instability to estimate molybdenum demand have made unstable molybdenum prices but, on the other hand, the current price of US$10 per lb. of Mo for molybdenum oxide has still stayed in a profitable line for molybdenum mines and part of the mines have intended to increase their molybdenum production. Accordingly, the matter to reduce molybdenum production is still out of the crucial moment. This aspect is also a factor to be difficult to ascertain molybdenum prices. Thompson Creek Metals of the USA announced in November of 2008 that, by means of utilizing their low cost, the company is scheduled to produce 31.5 - 34.0 million lbs per annum of molybdenum in concentrate in 2009, but this company announced again on the end January of 2009 that the output of molybdenum in 2009 has been revised and planned to be reduced to 20 - 24 million lbs. per annum. This rectification of molybdenum production in 2009 by Thompson Creek Metals is to cope with a deterioration of the actual demand for molybdenum.

Dealer oxide price (price of molybdenum oxide) in the third week of January was in the range of US$9.25 - 9.50 per lb. of Mo and the current price of ferro-molybdenum is being quoted at US$24.50 - 25.50 per kg. of Mo. Dealers in Europe and the USA have taken an attitude to purchase ferro-molybdenum on spot base at discounted prices and their bidden price on ferro-molybdenum has been informed as US$20 per kg. of Mo (approximately US$9.00 per lb. of Mo). These molybdenum prices have been assumed to be the lowest ones at present.
last modified : Wed 04 Feb, 2009 [11:01]
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