London 06/07/2016 - The LME (London Metal Exchange) molybdenum market continued to shrink on Wednesday - a pattern of falling volumes and open interest was exacerbated by a tumble in inventories, further damping down on liquidity.
Today, warehouse stocks fell 12 tonnes - equal to two lots - to just 84 tonnes, the lowest since October 2014.
Business has been patchy in the LME contract this year despite the big price movements seen in the physical market. LME molybdenum oxide last traded at the end of June when 12 lots were transacted.
But the contract has been a slow performer since it launched in February 2010. At present, market open interest is down to eight lots, all of it on or around the July prompt date and the August prompt date.
Open interest has never been particularly large - even in mid-2010, when the market was developing, levels were only in the mid-30s.
The lack of interest in the LME contract has seen a disconnect from the physical market where prices hit their highest levels since late-January 2015 just over a month ago.
It hit $8.25/8.75 per pound, equal to $18,188/19,290 per tonne. But the LME cash equivalent lagged behind that move and was $14,800/15,300, rising only in mid-June to the current $16,500/17,000.
Traders said this was due to sporadic enquiries on the LME - a stance that will be amplified by ever-decreasing liquidity, open interest and availability.
The lifetime price peak for the LME contract was set in March 2010 at $41,990.
(Editing by Mark Shaw)