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Part Two: Will Molybdenum Prices Survive a Base Metals Correction?

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<html> <head> <title>Part Two: Will Molybdenum Prices Survive a Base Metals Correction?</title> </head> <body> <h1>Part Two: Will Molybdenum Prices Survive a Base Metals Correction?</h1> <div class="info">Author: <a href="http://jamesfinch.articlealley.com/">James Finch</a></div><div class="body">Magyar analyzed the rapid rise of molybdenum's pricing and its drift since peaking in 2005. "Inventory was rebuilt by the end of 2005," he pointed out. "The seeds for this price level were sown in the fourth quarter of 2001." Molybdenum traded around $3/pound. Copper prices were sub-$1/pound. He explained the climate during late 2001, "The copper producers weren't making any money. Kennecott, Phelps Dodge and others decided to take production off the market in the fourth quarter (2001)." Moly prices jumped. "The reduced supply coupled with the increased demand in steel caught molybdenum producers off guard." <br /> <br /> There were hurdles to overcome. The Chinese demand for stainless steel sent the price soaring higher in 2004, ending over $30/pound. "There were bottlenecks leading to this price jump. Producers had to hire back the miners. Moly roasters were unprepared for the increased supply. It took them about five months to get into gear."<br /> <br /> The question lacking a definite answer is: Will demand slack off or remain firm? Comments from China's largest molybdenum miner, the world's third largest moly producer, revealed there is strong domestic demand for the country's steel industry. He anticipated moly exports would trend lower. Will U.S. and Chilean molybdenum production suffice to match the demand? Smirnova analyzed the current supply and demand balance, "The answer to that question depends on the time frame under consideration." She explained, "We have seen announcements from various mining companies to increase moly production, especially as a by-product of copper production. Whether these efforts will have an impact on the market is yet to be seen." Why is that? Smirnova pointed out, "For one, most of the expansions are of small scale, one to five million pounds. More importantly, the timing on the larger projects is questionable."<br /> <br /> The Sprott Research Associate cited one example in the United States, "Phelps Dodge is planning to restart their Climax mine in Colorado pending the completion of a final feasibility study. The mine would produce 20-30 million pounds but would not commence production until the end of 2009." It is another evidence of environmental regulations helping to set the price of many commodities. She offered her insight, "This underscores the importance of permitting and the amount of hoop jumping that needs to occur for a project of that scale to materialize."<br /> <br /> The United States is not alone with production challenges. Another of the world's top molybdenum producer is Chile, which mines molybdenum as a byproduct of copper production. "Chile has its own issues," Smirnova said. "There is a shortage of water and certain regions have stopped granting new water rights." She added more woes to the list Chilean moly producers, "Challenges such as increased environmental awareness, lengthier permitting schedules and industry-wide equipment shortages are making it more difficult to start new mines or expand capacity." <br /> <br /> Smirnova concluded increased production may not necessarily be readily available, "From this perspective, I question the extent to which moly production can grow in the short-term." Magyar believes the Climax mine won't open until the super-producing Henderson mine is exhausted. He suspects Phelps Dodge is using the Climax mine as a stalking horse, for the next few years, to keep production off the market.<br /> <br /> Current molybdenum pricing, about $24 to $25/pound is at a wide variance with actual production costs. "Production costs for primary molybdenum is about $4/pound," Magyar explained. "The by-product moly is about $2/pound, since the copper companies don't' have the added mining costs – it is byproduct." New mines, according to Magyar, might have production costs of between $6 and $8/pound.<br /></div> <div class="source">Article Source: <a href="http://www.articlealley.com/http://jamesfinch.articlealley.com/part-two-will-molybdenum-prices-survive-a-base-metals-correction-77019.html">http://www.articlealley.com/http://jamesfinch.articlealley.com/part-two-will-molybdenum-prices-survive-a-base-metals-correction-77019.html</a></div> <div class="author"> <div class="authorOccupation"><strong>Occupation:</strong> Writer</div> <div class="authorBio">James Finch is a contributing editor for StockInterview.com and other publications. http://www.stockinterview.com</div> <div class="authorUrl"><a href="http://www.stockinterview.com" target="_blank">http://www.stockinterview.com</a></div></author> </body> </html>

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Part Two: Will Molybdenum Prices Survive a Base Metals Correction? Author: James Finch Magyar analyzed the rapid rise of molybdenum's pricing and its drift since peaking in 2005. "Inventory was rebuilt by the end of 2005," he pointed out. "The seeds for this price level were sown in the fourth quarter of 2001." Molybdenum traded around $3/pound. Copper prices were sub-$1/pound. He explained the climate during late 2001, "The copper producers weren't making any money. Kennecott, Phelps Dodge and others decided to take production off the market in the fourth quarter (2001)." Moly prices jumped. "The reduced supply coupled with the increased demand in steel caught molybdenum producers off guard." There were hurdles to overcome. The Chinese demand for stainless steel sent the price soaring higher in 2004, ending over $30/pound. "There were bottlenecks leading to this price jump. Producers had to hire back the miners. Moly roasters were unprepared for the increased supply. It took them about five months to get into gear." The question lacking a definite answer is: Will demand slack off or remain firm? Comments from China's largest molybdenum miner, the world's third largest moly producer, revealed there is strong domestic demand for the country's steel industry. He anticipated moly exports would trend lower. Will U.S. and Chilean molybdenum production suffice to match the demand? Smirnova analyzed the current supply and demand balance, "The answer to that question depends on the time frame under consideration." She explained, "We have seen announcements from various mining companies to increase moly production, especially as a by-product of copper production. Whether these efforts will have an impact on the market is yet to be seen." Why is that? Smirnova pointed out, "For one, most of the expansions are of small scale, one to five million pounds. More importantly, the timing on the larger projects is questionable." The Sprott Research Associate cited one example in the United States, "Phelps Dodge is planning to restart their Climax mine in Colorado pending the completion of a final feasibility study. The mine would produce 20-30 million pounds but would not commence production until the end of 2009." It is another evidence of environmental regulations helping to set the price of many commodities. She offered her insight, "This underscores the importance of permitting and the amount of hoop jumping that needs to occur for a project of that scale to materialize." The United States is not alone with production challenges. Another of the world's top molybdenum producer is Chile, which mines molybdenum as a byproduct of copper production. "Chile has its own issues," Smirnova said. "There is a shortage of water and certain regions have stopped granting new water rights." She added more woes to the list Chilean moly producers, "Challenges such as increased environmental awareness, lengthier permitting schedules and industry-wide equipment shortages are making it more difficult to start new mines or expand capacity." Smirnova concluded increased production may not necessarily be readily available, "From this perspective, I question the extent to which moly production can grow in the short-term." Magyar believes the Climax mine won't open until the super-producing Henderson mine is exhausted. He suspects Phelps Dodge is using the Climax mine as a stalking horse, for the next few years, to keep production off the market. Current molybdenum pricing, about $24 to $25/pound is at a wide variance with actual production costs. "Production costs for primary molybdenum is about $4/pound," Magyar explained. "The by-product moly is about $2/pound, since the copper companies don't' have the added mining costs – it is byproduct." New mines, according to Magyar, might have production costs of between $6 and $8/pound. Article Source: http://www.articlealley.com/http://jamesfinch.articlealley.com/part-two-will-molybdenum-prices-survive-a-base-metals-correction-77019.html About the Author: James Finch is a contributing editor for StockInterview.com and other publications. http://www.stockinterview.com http://www.stockinterview.com

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by James Finch
James Finch is a contributing editor for StockInterview.com and other publications. http://www.stockinterview.com
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Part Two: Will Molybdenum Prices Survive a Base Metals Correction?

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