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Realities Of Supply / Demand In Q4 / 08 Panicked Moly Oxide Price
= Moly Surplus In Oct. - Dec. / 08 Is Thought To Be 17.5 Million Lbs.
The market price of molybdenum oxide in the fourth quarter (October - December) of 2008 had suddenly fallen steeply from US$30 per lb. of Mo at the end September of 2008 to US$8.75 per lb. of Mo at the end December of the same year, having broken the level of US$10. According to the settlement of accounts for October - December quarter of 2008 released in last week by Freeport-McMoRan Copper & Gold Inc. (Freeport) of the USA, the reason for this sharp price fall of molybdenum oxide was due to a sudden and considerable shrink of the world demand for molybdenum.

Although there was a strong view in the market that supply and demand of molybdenum in the world for 2008 would be summarized to have moved on the well-balanced situation, a sudden and steep price fall of molybdenum oxide emerged in October - December quarter had panicked the parties concerned. In the settlement of accounts released by Freeport as mentioned above, with reference to the data compiled by CRU, Freeport said that supply and demand of molybdenum in the world for October - December quarter of 2008 were <> consumption : 96.0 million lbs., <> supply : 113.4 million lbs. and <> balance : oversupply of 17.4 million lbs., having suddenly appeared on the market.

According to the survey by CRU, the quantities of molybdenum consumed and supplied in the world for the calendar year (January - December) of 2007 were <> consumption : 453.9 million lbs., <> supply : 456.6 million lbs. and <> balance : oversupply of 2.7 million lbs. Also, those in the first 9 months (January - September) of 2008 were <> consumption : 353.2 million lbs., <> supply : 358.4 million lbs. and <> balance : oversupply of 5.2 million lbs.

The bankruptcy of Liehman Brothers in the USA emerged suddenly in September of 2008 has given a serious shock on the world demand for molybdenum, having resulted in a shrink of molybdenum consumption, and both of consumers and traders commenced to reduce drastically their molybdenum stocks in October - December quarter. However, this activity for de-stocking has caused to reduce molybdenum stocks at steel mills but also to accelerate disposals of molybdenum stocks held by convertors and traders, being engaged in distribution of molybdenum. Consequently, these actions have resulted in a sudden and steep fall of molybdenum prices.

Accordingly, the market price (per lb. of Mo) of molybdenum oxide in the world throughout the calendar year of 2008 moved on <> US$34.0 as a higher side and <> US$8.75 as a lower side. Also, those in October - December quarter of 2008 were <> US$30.0 as a higher side and <> US$8.75 as a lower side., having recorded a considerable fall of more than 70% from the higher level.

However, a majority of major molybdenum producers announced recently plans to reduce their molybdenum production in 2009 and, on the basis of these plans, Freeport has a view of (1) the level of molybdenum stocks is lowering and (2) when the world demand for molybdenum is revived, molybdenum prices are expected to rebound quickly. The matter in question is how extent does each producer implement their cutback of molybdenum production in 2009 and the quantities of molybdenum planned to be reduced by each company of major producers in 2009 are as follows ;

<> Freeport-McMoRan / USA = To reduce by 10.0 million lbs. / year at Henderson mine / USA (produced 40.0 million lbs. in 2008) and by 3.0 million lbs. / year at Cerro Verde mine / Peru (produced 3.0 million lbs. in 2008),

<> Thompson Creek Metals / USA = To produce on scale of 20 - 24 million lbs. / year at mines / Canada and USA (as decreased compared to scale of 25 - 26 million lbs. produced in 2008),

<> Codelco / Chile = Anticipated to produce 50 million lbs. / year (as decreased compared with 55 million lbs. produced in 2008),

<> Antofagasta mine / Chile = Scheduled to produce 17.85 million lbs. / year (in comparison with 17.20 million lbs. in 2008 and 22.5 million lbs. in 2007), and

<> Kennecott / USA = Produced 23.37 million lbs. in 2008 as decreased from that (32.85 million lbs,) in 2007. Kennecott so far did not indicate their molybdenum production in 2009 but, as crude ore has contained lower molybdenum at present, the molybdenum output in 2009 has inclined to decrease.
last modified : Tue 17 Feb, 2009 [10:31]
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