Moly Continues To Bounce
Ryan\'s Notes
http://finance.groups.yahoo.com/group/MOLYBDENUM_NEWS_Forum/
Some people are saying they didn\'t expect it to happen so early in the month, but they did expect it; some people are admitting that they were unprepared for it, and the rest are shaking their heads in amazement.
Once again moly prices are moving upward, and consumers are scrambling to secure material before prices rise higher. Neither consumers, traders nor producers are holding much stock, and as a result, the modest increase in buying interest at the start of the month has led to rising prices.
The rally has been fueled by a series of events in China, starting with the announcement of a 15% export tax on moly oxide, effective Jan. 1 in addition to the 10% export tax on ferromoly imposed on Nov. 1, followed by news that exporters would be required to register for licenses and finally, notification that China will impose—as yet undisclosed—export quotas on ferromoly and moly oxide. Sources in China believe that the government is waiting to see final export figures for 2006 before deciding what quotas to levy.
Even before the license requirement, taxes and export quotas, Chinese ferromoly and moly suppliers were unwilling to lower their prices below market levels. Faced with few consumer inquiries, traders did not want to commit to buying from the Chinese at prices not considered particularly attractive.
"The price rise of the last two weeks is actually demand driven," said a trader, "and I don\'t see any change on the supply side that would cause prices to come down this quarter."
Another trader predicted, "This is what we are going to see for the entire year. Prices will be volatile, but I don\'t see any significant drops. The producers are well sold under contracts, and many of the mills would like to increase their contract purchases."
A producer confirmed that contract customers were asking for early shipment of material. A major US mill that bought two trucks of oxide and two trucks of FeMo for February delivery on Jan. 12, two days later issued another solicitation for four trucks of FeMo and two trucks of oxide for March delivery. "The buyer was either nervous about prices going up further or disappointed with the bids at the first tender or both," said a trader.
At the initial tender the mill reportedly bought oxide at slightly below $25.00 per lb and FeMo in the high $27s per lb. At the time of the tender the spot oxide price was $24.50-25 per lb and the FeMo price was $26.25-26.75. Several bidders, including producers, said that they had to no-quote the FeMo portion of the business.
Oxide sales were booked in Europe at $25.50-25.75, and briquette sales were done at $25.85-25.95. Some traders said they had sold at $26.00. European mills bought FeMo at $62.30-62.50 per kg early in the week, but later sales for March were done at $63 and a large inquiry for 150 mt for February/March was expected to send FeMo prices still higher. Some traders may have been over-eager to hike prices, but they believe that there is more spot buying to be done and that replacement costs justify higher prices. Chinese suppliers are asking $62 per kg, duty unpaid.
Late last week, a few European traders said the upward price movement had stalled because more sellers, especially Chinese suppliers, had entered the market. One trader reported purchasing Chinese oxide at $25.30-25.40. At the same time, US traders reported that there was virtually no FeMo available for February and forward sales through July were made in Europe at above $25 for oxide and at $62 per kg for FeMo. A converter said he was sold out through March, and less than truckload FeMo sales were booked at $64 per kg.
With the roasting bottlenecks pretty much cleared up in 2006 and increased output in China and at several Western mines, the tightness of supply has been surprising.
Kennecott\'s moly production at Bingham Canyon, UT, fell 8% in the fourth quarter to 4,200 mt compared to 4,600 mt in the fourth quarter of 2005, but for the year, moly production rose 8% to 16,800 mt from 15,600 mt in 2005.
Blue Pearl Mining revised its moly production forecast for this year to 21-million lb (12.8-million lb from Thompson Creek and 8.5-million lb from Endako) from its initial estimate of 20-million lb. In 2006, Thompson Creek is believed to have produced 26-million lb, with 16.9-million lb from Thompson Creek and 9.1-million lb from its 75% stake in Endako, which was expected to produce, a total 12.1-million lb.
Codelco denied reports that it was having any production problems at Chuquicamata. A company source said that the conveyor belt that was damaged in a rockslide in July is not expected to be fixed until May. Originally, the repair was expected to take a month. Even so, Codelco has found a way to work around the broken conveyor belt and transportation of concentrate, while less efficient, is equal to when the conveyor belt was operational. Codelco had expected its output in 2006 to drop to 28,000 mt from the projected 32,000 mt because of ore grades and the conveyor belt outage. Recent figures, however, reportedly show that the company produced 31,000-32,000 mt in 2006. For 2007, Codelco expects to produce 25,000-30,000 mt, but sources believe production will be closer to 25,000 mt than 30,000 mt. In 2005, Codelco produced about 36,700 mt.
The Chilean Copper Commission (Cochilco) expects Chile\'s moly production to drop 12% this year to 38,000 mt from 43,121 mt in 2006. The government agency also projected that prices would average $20 per lb compared to $24.80 in 2006.
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