London 26/05/2016 - Molybdenum prices continued their second-quarter rally in Europe this week and, after a particularly sharp mid-week movement, hit their highest levels since late-January 2015
Molybdenum oxide (MO3) was indicated at $8.25/8.75 per pound, up around $1.50 from a week ago levels. The market has risen $3.50 or some 74 percent since December 2015 when it was struggling around its lowest since 2001.
Steel-making alloy ferro-molybdenum rose to $19.25/20.00 per pound, some $2.0 higher over the last week - in late-2015 it was as low as $12.25 per pound.
The strength in prices is more supply-driven than due to an upsurge in demand, traders said. Given that much of the steel mill industry operates on a hand-to-mouth basis and traders only hold small stocks, a modest pick-up in off-take or enquiries will feed through into prices.
"The dynamics of minor metals is that it only takes a small change in the spot market on the buy side to see big moves. [Molybdenum] has been gathering a head of speed for a while now," one said.
Molybdenum supply is a mix of primary production and by-product availability from copper output. Global production in 2015 dropped to 267,000 tonnes from 2014's 281,000 tonnes, according to United States Geological Survey (USGS) data. China is the world's biggest producer, accounting for 101,000 tonnes, while the US and Chile produced 56,300 tonnes and 49,000 tonnes respectively last year.
The other factor behind the most recent upmove was Polish producer KGHM's decision to delay the next expansion phase at Sierra Gorda, its major mine in Chile, traders also said. The mine produced 15 million pounds (6,806 tonnes) of MO3 last year - the second-phase target is 25 million pounds (11,340 tonnes).
Separately, the free-market move has not affected the LME contract price, which is now out of line. On Thursday, the cash official price was $14,800/15,300 per tonne, a level it has been at since May 11. This equates to $6.80 per pound.
But the contract has been a slow performer since it launched in February 2010. Molybdenum open interest is just 12 six-tonne lots, with inventories at 132 tonnes. LME turnover up to the end of April was 126 lots, a 57.4-percent fall on 2015 levels.
Open interest has never been particularly large - even in mid-2010, when the market was developing, levels were only in the mid-30s. The lifetime price peak for the LME contract was set in March 2010 at $41,990.
(Editing by Mark Shaw)