another Finch article
Upcoming China Export Quotas Could Send Molybdenum to Record Price
Thursday June 28, 4:34 am ET
James Finch submits: Our sources in Asia confirmed an industry trade report pre-announcing China would slash export quotas on molybdenum products by approximately 50 percent. The quotas are expected to take effect next week.
ADVERTISEMENT
Many had been bracing for a 30-percent reduction in molybdenum exports. Traders are probably reeling now.
Many stainless steel mills go through summer maintenance programs during this period.
After Labor Day, the molybdenum price could rush past the June 2005 record price. This could result in a frenzied market through at least mid spring 2008, as we anticipate traders to fight for depleting molybdenum inventories in the face of continued firm demand.
Next week's China announcement could provide the trigger for a spectacular run.
In a March 2007 interview with Thompson Creek executive chairman Ian McDonald, his biggest concern was China’s capability of dumping a large quantity of molybdenum product into the market and driving the molybdenum price lower.
It now appears that concerns of Chinese dumping are unwarranted.
In previous interviews with Adanac Molybdenum Corp executive chairman Larry Reaugh, he pointed out that South American and U.S. molybdenum production is unlikely to rise, and more likely to stagnate or decline. Reaugh explained that copper producers have been mining their higher grade material to capitalize upon the firm molybdenum price. Rio Tinto’s (NYSE: RTP - News) Bingham Canyon in Utah has also suffered falling molybdenum production.
Molybdenum demand has remained strong despite higher pricing.
U.S. Geological Survey molybdenum expert Michael Magyar lamented in an interview we conducted with him in July 2006 that the industry had a long way to go before molybdenum inventories could be rebuilt.
For stainless steel manufacturers and other end users, a sustained molybdenum price spike could evolve into a nightmare before year end and into 2008. But for investors in molybdenum producers, near-term producers, and potentially for exploration companies, this could provide the sort of double-digit returns many investors found in uranium mining and exploration companies during late 2005 into early 2007.