A Perspective on the Molybdenum MarketExcerpted from an article
Written by Ken Reser
At MolySeek.com
https://www.molyseek.com/index.php?option=com_content&task=view&id=68&Itemid=2
Now we are in the 1st Q /07 and the Moly metal is holding firm @ $25.55 currently and appears to be ready to retrace some past gains in price. Just today I read an article based on some comments by a Chilean mining official stating he sees about a 2% increase in world production, but at the same time he says Chilean Moly production will be off over the /05/06 levels. Actually “way” off is more correct. (From 48,000 T in /05 to 38,000 T in /07) We all know (or should) that this is the case in almost all ‘Primary’ & by product Moly mines, especially open pit, due to the high grading of the richer zones to maximize Copper a/o Moly production and I don’t understand why this commentator (and many others) would not realize all the mines have high graded as well as some like Codelco, (and others) along with their substantially increased pit feed, also ran the massive low grade stock piles that had accumulated over the years of low prices. Now today those stockpiles are gone and major pullback stripping programs are underway on the high graded pits. As an example the aforementioned article also speaks to his view of the uses & demands for Moly, but in a very narrow range of vision as do most news articles on Moly. (link)
To myself, many, if not most Molybdenum and other base metals commentators see only parts of the greater picture although I have read estimates from a couple of respected research groups that call for 4 to 7% yearly increases in Moly demand thru 2009/10 and beyond. Most of the articles I’ve read, as do the Chilean Gov’t Mining fellow’s comments, fail to grasp the impact of this ongoing worldwide energy boom cycle we’re in and an increasing set of new factors attributing to more and more Moly being sought, bought and used. Yes, Stainless Steel is one of the largest uses, but then while they talk of the odd pipeline or drill tubing use, for the most part they never mention the dozens of massive double hulled oil super tankers under construction or currently being commissioned to replace the old single hulled tankers that must be decommissioned by 2010 and at the same time create increased carrying capacity (greater #’s of tankers) around the globe. They never mention that there are about 81,000 miles of large diameter pipelines being built and on the drawing board around the globe.
The mainstream writers don’t ever mention the massive new demand for Moly in refinery catalysts to meet increased refining demand for gas & diesel fuels or other petrol & chemical products. New refineries are being built in far off places, even if not here in NA. No, nothing either on Coal to liquid fuel plants being built in Asia, (both processes need large amounts of Moly based desulfurization Catalysts constantly) nor the massive Chinese shipping and military fleets being constructed and the amounts of steel/Moly alloys used. Anyone mention the test plant the US Gov’t built to test and successfully create a high grade Jet Fuel from Coal not so long ago? No mention of China putting approx 400,000 new vehicles on the road in March last year, in country, in one month alone. What’s a few hundred million Asians trading bicycle’s for cars got to do w/ anything? Molybdenum that’s what, and Copper as well. Next factor the worldwide increase in fuels & energy consumption and what that alone will do to Oil prices. Higher crude prices and we see more exploration, that’s always a fact. More production, more exploration, more refineries, more pipelines and more drill steel etc, more Moly. Did anyone ever mention Plasma Televisions in the same breath as Moly to you? Well a manufactured Moly powder product is present in the screens, and how many millions of wide screens will be made in years ahead? We’re beginning to see people grasp the fact that major nuclear reactor construction lies ahead in many parts of the world with China in the lead w/ 20 odd new ones in the works. If memory serves me from my past editorials research, I believe the reactor vessel alloy uses about 16% Moly, and all the piping would be in the 3-6% range. Having researched and written a few editorials in the last two years regarding Molybdenum, I continue to be amazed at new uses and Moly related discoveries being made. I don’t profess to be any kind of an expert, but I do keep coming back to the fact that very few analysts have a very realistic or comprehensive view on Molybdenum going forward and most just let it slip under their radar screen period. Was it not one of the biggest percentage gainers of any of the base metals over the last two years, even while now trading at $25.00 range being down from the high of +/- $39.00? And is it not currently still holding strong from $24.00 to $26.00, all the while being ignored by almost all metals analysts? One gentleman comes to mind whom I feel has shown a very good grasp of the Moly situation and whose research and writing on the topic of Molybdenum, is James Finch of the Resource Investor. His work has been excellent to my mind to say the least, but also paid little heed by all mainstream mining analysts it seems.
I don’t believe I need go into much more detail on Moly uses here as I’ve outlined most of those I could find thru extensive research in my other past editorials, but when any metals mining market investor finds a metal that is in great demand and that demand appears to be on the long term road to substantive increases in demand, then I think they should be able to access other points of view. My views won’t jive with some, but nor do some hold faith in the projections of the likes of Jim Rogers, among others, and I think he and a few of his peers have it right. Metals and Energy are “FINITE”, and the world’s demand will only increase as time passes. New mines are and have been for years, very few and far between, and as such therein lie some of the best opportunities for metals investing in public mining companies, especially those w/ near term large scale production of Molybdenum. Look back to past highs years ago on Moly and you will see it was directly related timewise to high Oil prices. The Oil crisis back then didn’t last for long and was probably orchestrated but while it did last Moly was king. Personally speaking (as always) I’m a believer that Energy, Molybdenum, Uranium, Gold, Silver and other usual high demand metals are going to see much higher price levels over the years to come and I plan to benefit with continued study and research as I always do before placing my bets.
Yesterday I read one article of how the Moly price was weakening and the price per pound would lose 19% y/o/y in 2007. Yet today in the most respected & widely read “Ryan’s Notes” commentary I read this comment:
The moly market continued to firm, and many sellers believe that prices could rise further. “This is actually demand driven,” said one trader, “and I don’t see any change on the supply side.” Another trader predicted, “This is what we are going to see for the entire year. Prices are going to be volatile, but I don’t see any significant drops.