Moly prices will continue to sell above $30/lb

Specialty steel alloy has risen eight-fold in recent months

By Tom Stundza -- Purchasing, 9/3/2008 11:46:00 AM

Molybdenum prices have averaged $30/lb for the past 3 ½ years, reflecting tight inventory levels, production cost increases and surging consumption of specialty steels that are made with the alloying metal. Between 1982 and 2004, the alloying metals had cost an average $4/lb.

Purchasingdata.com buyer surveys find that moly has been selling at an average $33 so far in 2008 and the 2009 price average may be even higher, according to a new forecast by Global Insight of Waltham, Mass., because of expected continued strong investment spending worldwide by the chemical process industries.

Supply of the alloying metal is tight--so tight, in fact, that a closed moly mine (Freeport-McMoRan’s Climax facility in Colorado) soon will be shipping material, along with the new General Moly facility in Mt. Hope, Nev., and the Thompson Creek Mining deposit in British Columbia. “Together, these projects ensure a well-supplied market,” says Global Insight analyst K.C. Chang in a note to clients, but not until 2010.

Chang expects the alloying metal “to sell around $35/lb going into 2009, gradually sliding toward the $30 mark as the year ends.” He adds in a note to clients that, as large mining operations begin in 2010, buyers can expect higher supply levels and a downward price correction.

As a side note, the London Metal Exchange is in the early stages of exploring a molybdenum futures contract. “Proponents believe such a vehicle would facilitate efficient price discovery,” says Chang, while “those opposed highlight the introduction of speculators and heightened price volatility” from an LME contract.

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