Molybdenum’s Range Keeps Demand Agency

If one believes the forecasts recently made by Terry Adams of UK-primarily based Adams Metals and the Albemarle Corporation, then the escalating demand for molybdenum merchandise may impression the stainless steel enterprise of POSCO. The Korean-based mostly steelmaker, with about 6.5 p.c of gross sales coming from stainless steel, is the world’s fourth or fifth largest, depending upon production or market capitalization.

reaction kettleBased on the company’s 2006 annual report, POSCO exports more than 70 percent of its steel merchandise across Asia, mainly to China, Japan and southeastern Asia. In response to report excessive nickel costs, the steelmaker introduced it would start manufacturing nickel-free stainless steels. So did European steelmakers ThyssenKrupp and Outokumpu, which has heavily relied on its austenitic products.

Would a sustained rally within the moly value result in the same backlash nickel not too long ago suffered? Sadly for steelmakers, molybdenum has a broader range of functions than nickel.

At a current trade conference, Terry Adams shocked his audience by warning of potential provide/demand imbalances commencing as early as 2011. He believes by 2015, the molybdenum worth could get ‘fascinating.’

However, this wasn’t the first sign of brewing hassle for molybdenum buyers. In early May, one trader advised American Metallic Market magazine, “We simply have no provide obtainable.” He lamented that primary moly producers, also known as swing producers, have ‘nothing to promote right now.’

On June 18th, China is expected to announce the export quotas for molybdenum merchandise it has assigned to a limited variety of exporters. Potential labor disputes at copper mines in Mexico and Chile might additional cut back obtainable molybdenum supply later in June. A Chilean labor spokesman warned of a ‘arduous and extended strike.’ Molybdenum mined as a byproduct of copper manufacturing accounts for about 60 percent of the global supply.

At this pace, molybdenum pricing may very well be severely impacted as early as this summer. By subsequent year, if main molybdenum manufacturing doesn’t rapidly rise to meet the demand, the pricing local weather might worsen for end-customers. Some traders imagine moly costs could soon creep above previous value peaks two years in the past. “Issues are going to get too much firmer as a result of there’s an absence of material,” one trader reported earlier this week. “There’s not loads on the bottom.”

In keeping with totally different down-the-street forecasts, the magic demand quantity is 460 million pounds of molybdenum. Adams predicts that projected western world demand might attain this consumption by 2015. Others consider robust moly demand could bring this target consumption a couple of years earlier.

Another concern is one we highlighted in a earlier article.

stockinterview.com/News/11082006/Roasting-molybdenum.html USGS molybdenum commodity specialist Michael Magyar warned of a bottleneck, “… we won’t roast much more moly proper now. Nobody is actively allowing for more roasting capacity in North America.

Additional roasting capacity is, nonetheless, coming online this 12 months or subsequent, courtesy of Molymet. Adams factors out, “With the growth in demand a new roaster, the dimensions of the brand new Molymet roaster is needed every two years.” Adams further explained, “Without additional funding a roaster bottleneck could happen in 2011. Molymet plans one other roaster about this time, but this would only permit another two years growth.”

In his presentation, Adams glimpsed sooner or later. While western world demand should continue to annually improve by three percent, demand in China and the C.I.S. may enhance by greater than 10 p.c every year. “The combined international impact can be an annual growth rate of about 4.5 %,” he predicted. “Western mines can have to increase production by no less than 6 % per annum.”

As we and others have concluded, Adams forecast, “Increased output at major (moly) mines might be needed to fill the hole past 2009.”

We presume delegates from the junior molybdenum mining attendees mentally began popping champagne corks after Adams announced this point. But it was his subsequent two factors which investors ought to digest:

o New or shuttered major mines should open by 2011

o By 2013, present primary mines and Climax could be at capacity

High-Stage Progress in the Molybdenum Chemical Market

Having researched molybdenum for more than one year, solely not too long ago did a few technical experts (http://stockinterview.com/News/06042007/molybdenum-copper-nickel-condenser-crossover.html) help us understand how a lot molybdenum is utilized within the condenser tubes of nuclear and desalination plants. Because of the diversified purposes for this steel, there is much less dependable info in regards to the molybdenum sector than in others we have explored, e.g. uranium.

We continue to assemble information for our next publication, “Investing in the good Molybdenum Bull Market,’ and will present our detailed analysis in late August.

We now have found two sturdy-growth areas for molybdenum functions.

It’s not just the steel market which makes use of molybdenum. Although the stainless and low alloy markets characterize about two-thirds of molybdenum utilization, the fastest rising market seems to be catalysts in the moly chemical market.

According to a spokesman for the Albemarle Corporation, moly consumption within the catalyst section may develop by greater than 30 percent by 2011. The chemical sector may consume as a lot as 30 million more pounds in the 2006 to 2011 time interval.

The worldwide catalyst market is anticipated to reach US$13 billion in sales this 12 months. Of this the petroleum refining sector should eat about 35 million pounds of molybdenum. The moly is used as a hydroprocessing (HPC) catalyst.

Rising global demand for crude oil, altering gasoline specifications and energy in demand for aviation and diesel gas should contribute to molybdenum demand.

As a result of the overall quality of crude oil has considerably deteriorated, over the previous 25 years, more molybdenum could be consumed as a catalyst throughout the refinery course of. Sulfur content material in U.S.-imported oil has doubled over this same time period. Molybdenum-based mostly catalysts are utilized to remove sulfur from petroleum, petrochemicals and coal-derived liquids

Tighter specs over the past 15 years have demanded a higher performing catalyst and extra contained molybdenum in those catalysts. Over this time-frame, catalyst demand per barrel of crude oil has doubled – a median growth charge of five p.c per year.

One business expert expects international HPC catalyst growth to annually enhance by eight p.c between 2006 and 2010. Molybdenum consumption for this use may increase by forty six percent by way of 2010. Annual consumption may rise to greater than 60 million pounds of molybdenum.

Lack of recent Major Mining Provide

The standard molybdenum concentrates being offered by the copper producers, as byproduct mining, comprise forty – forty five p.c Mo. Concentrates from primary producers usually common 50 – fifty five p.c.

In consequence, primary molybdenum mining operations offer a more desirable concentrate. Technical moly, also identified Mo03 (molybdenum trioxide) specifies 57 p.c Mo and accommodates lower than zero.05 percent copper and 0.1 percent sulfur. Main molybdenum producers provide concentrates with lesser amounts of deleterious components.

Because the concentrate is ‘cleaner,’ much less roasting is required to upgrade the fabric to tech oxide spec. Less electricity is expended to power the multi-hearth furnaces in the course of the roasting course of. The cleaner primary moly concentrate provides the roaster extra flexibility. The higher spec concentrates may be blended with lower spec concentrates to upgrade the overall product, or the roaster can refine the higher spec material separately if the top-consumer requires it.

The much less roasting to carry material as much as spec may also help keep away from the bottlenecks a few years from now.

Though byproduct molybdenum producers are expected to bear the brunt of elevated demand, the copper producers aren’t cooperating. Codelco’s molybdenum manufacturing dropped by 25 % in 2006 to 60 million pounds this previous year. Moly manufacturing could drop another 15 percent or extra this 12 months.

Because of the current molybdenum price revival, dozens of exploration corporations have ‘out of the blue’ develop into molybdenum corporations. There are scarce few with a probably viable undertaking.

Those major molybdenum producers and future producers we have been monitoring seem like moving their initiatives forward.

Thompson Creek is Thompson Creek. This has emerged because the ‘main’ primary player in North America while the world waits for Climax to come on-line once more. Some imagine the corporate’s Davidson moly deposit in British Columbia may not arrive on the company’s timetable. If that’s the case, then this might additional strain the moly value.

Roca Mines should become a producer throughout July. However, this company also hopes to develop its operations deeper and must also start these exploration efforts this summer. In the interim, the high-grade molybdenum discovered at the corporate’s MAX mine should become a money cow in the third and fourth quarters of this yr. And for a number of years forward. Although the corporate is just not but in production, there appears to be no scarcity of molybdenum traders clamoring for the corporate’s future manufacturing. One other indication of a tight market.

Last month, Adanac Molybdenum Corp ordered its long-lead time equipment for the development of its mining and milling advanced at Ruby Creek. Expenditures totaled practically C$forty million, for which the company has made its down funds. Additionally, a while this summer, Adanac should lastly obtain its permits and start building. Whereas the company boasts of 220 million pounds of molybdenum, a current chat with Adanac guide Ken Reser suggests Ruby Creek have more pounds than was previously thought. Ongoing drilling results may later verify this speculation.

We proceed to watch United Bolero as a promising growth company in Montana. We had been advised drilling at Bald Butte began over the weekend to upgrade the resource class. Hopefully, the drilling program will also move to its nearby Cannivan Gulch property. Traditionally, however not technically documented, major miners, who worked these properties within the previous moly cycle, estimated the company’s properties could host greater than 400 million pounds of molybdenum.

Main producers, reminiscent of these and presumably others, is what molybdenum finish-users are relying upon to meet their wants as we strategy 2009, 2010 and past.

Over the course of this summer, we’ll additional study other potential close to-term producers, akin to Moly Mines and others.

Conclusion

Many within the trade have warned us concerning the potential increase of ‘moly dumping’ by the Chinese language. Historically, China has helped chill out molybdenum costs in the past. In keeping with Adams, as famous earlier in this text, China may develop into much less of a factor.

Basically, this should not be a concern. Sometimes, a country is indirectly centered on the background of its main politician. In China’s case, the eight members of the Politburo Standing Committee – China’s most highly effective politicians – are all engineers. All are graduates of engineering or technology faculties.

China’s president was trained as a hydraulics engineer. The premier is a geologist, who additionally has a level as a mining engineer. The previous vice-premier was skilled as an electrical engineer, as was the ‘propaganda’ chief. The Secretary of Political and Legislative Affairs was skilled as a metallurgist. Others hold degrees in thermal engineering, radio electronics or digital motor design.

Engineers like to build issues. China has embarked on the best industrialization interval in historical past, dwarfing the development of infrastructure of the late nineteenth century in Europe and North America. As a result of molybdenum’s functions embrace architecture, power, petroleum refinement, coal conversion, chemicals and other industrial applications, we would not be stunned if China quickly proclaims the ‘strategic’ importance of molybdenum (as it has uranium) and stops all exports.

Molybdenum also performs a robust position in quite a few and numerous army functions. Globally, military spending reached $1.2 trillion final 12 months. In 2006, China surpassed Japan as the biggest military spender in Asia. The U.S. Pentagon estimates China could be spending up to US$125 billion this 12 months. At the least ten sorts of ballistic missiles are deployed or in development. Our preliminary analysis into this topic confirms the big proportion amount of molybdenum utilized in missiles. In some purposes, the moly content material is higher than 20 p.c.

In summary, each time we delve into a brand new area to investigate demand for the molybdenum application, we discover growth. Sturdy demand might shock many stock and business analysts over the following decade. Within the meanwhile, extra major molybdenum producers want to come back ahead. In contrast to some, we don’t consider the molybdenum story has but been absolutely revealed. This summer time, we hope to make the molybdenum market extra transparent – both on the demand aspect and the availability side.com. All Rights Reserved.

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