Moly Prices holding up - High Demand & Shrinking SHere is an article written on the Front Page of Stockhouse. SKIP down to the
Molybdenum Heading about 1/2 way down the page. Most of us already had a pretty good idea that this was happening BUT it is good to see a wider audience understands this as well.
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US dollar gains and hard commodities
8/12/2008 11:19:57 AM | Dave Brown
Copper consumption in on the decline?
The major economic news flow on Friday was the reenergized dollar and its impact on the commodity markets.
Many observers still believe the continued outlook for the economy for the second half of FY2008 will be even weaker than the first half. Households have been putting tax rebates into savings and for paying debts, instead of spending those funds immediately in stores. The combined issues of labor surpluses, stagnant wages, falling home values and tighter credit have weighed heavily on consumer perception and confidence levels, and retailers are showing soft earnings results for second quarter of FY2008.
With escalated geo-political tensions, and conflict breaking out between and over the weekend, some observers believe that the fighting would disrupt energy exports from the Caspian region. Senior Bush administration officials, however, stressed that the is focused on diplomacy to facilitate an end to the hostilities, although officials have described the Russian offensive as a regional crisis that would not require outside intervention. This evolving development should be a primary catalyst for futures contract prices in the coming week.
Copper: Drawing on reserves
Copper prices are primarily determined by demand from and the , the two largest consumers. The housing and construction woes of the are widely understood; however, there is considerable speculation that even is performing below expectations. Calculations on current Chinese consumption indicate that it is about 4.8%, well short of the estimated 10% forecast. Consumption measures domestic production plus imports, but does not take into account restocking or destocking. If is currently destocking by drawing on its reserves, this number would be artificially low, and the true consumption could actually be right on track.
Hovering like a lead balloon
The price of lead is currently situated around 94 cents per pound, which is up over 20 cents from last month, but down about 46 cents from the corresponding period last year.
Molybdenum: Applications growth and decreased supply forecast
High demand for molybdenum coupled with concerns of shrinking global supply and a strong growth in increased applications have contributed to relatively stable prices. Recently, Thompson Creek Molybdenum (TSX: T.TCM, Stock Forum) share prices slipped on reports of a decline in sales as a result of a build-up of inventory caused by a planned maintenance shutdown of its Pittsburgh facility. Although the company looks on target in meeting its 2008 production expectations, and profits are up, the increase was lower than anticipated.
Iron: A game of Monopoly
An ongoing hostile takeover bid between BHP Billiton Ltd.(NYSE: BHP, Stock Forum) and Rio Tinto (NYSE: RTP, Stock Forum) may be over by the year-end. The European Commission is set to rule on the takeover on December 9, and many believe the Commission may oppose the transaction that would not only give BHP a monopoly on the world’s iron ore, but a 25% market share in mined uranium and 24% of copper concentrate and seaborne coking coal. Anti-trust regulators in the 27-nation European Union have been conducting a probe of the BHP plan and have said they hold “serious doubts” about a transaction that would enable one company to control more than 33% of the world’s iron ore supply.
ABOUT THE AUTHOR
Dave Brown
Dave Brown has worked for seven years at a national mutual fund organization where he spent the last six years on the international equities research team. He received his formal training in both geography and education from . As an active community member, Dave has volunteered for ten years with Family and Children’s Society and also served as a treasurer and newsletter editor for a local chapter of UNICEF.
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