Gemsasia Investments

Molybdenum is a silvery-white, hard, malleable, metallic element with the atomic number 42. Molybdenum melts at about 2,610 °C and boils at about 4,640 °C. Swedish chemist Carl Wilhelm Scheele discovered molybdenum in 1778.

Molybdenum occurs in nature in the form of molybdenite and wulfenite. Contributing to the growth of plants, it is an important trace element in soils. Approximately 70% of the world supply of molybdenum is obtained as a by-product of copper mining. Molybdenum is chiefly used as an alloy to strengthen steel and resist corrosion. It is used for structural work, aircraft parts, and forged automobile parts because it withstands high temperatures and pressures and adds strength. Other uses include lubricants, a refractory metal in chemical applications, electron tubing, and it also finds usage in oil processing as catalyst for sulfur-removal.

World production of molybdenum in 2001 fell –2.3% to 130,000 metric tons from 133,000 metric tons in 2000. The world’s largest producers of molybdenum are the U.S.A. with 28.9% of world production, Chile with 25.4%, and China with 21.7%. Chile’s production has increased sharply in recent years and its 2001 production level of 33,000 metric tons was more than double that seen 10 years earlier.

US production of molybdenum concentrate in 2001 fell –8.1% to an 8-year low of 37,600 metric tons. US production of molybdenum primary products in 2001 fell –20.3% to 15,700 metric tons, with 14,900 metric tons of that production in molybdic oxide and 771 metric tons in molybdenum metal powder.

US consumption of molybdenum concentrate fell –1.5% to 33,300 metric tons in 2001 from 33,800 metric tons in 2000. US consumption of molybdenum concentrate has more than doubled over the last 10 years. US consumption of molybdenum primary products fell by 11.5% to 16,200 metric tons in 2001 from 18,300 metric tons in 2000.

US imports of molybdenum concentrate for consumption in 2001 fell –1.8% to 6,010 metric tons from 6,120 metric tons in 2000.

In several analysts’ opinion, molybdenum should assert itself on the market in 2009 better than other industrial metals. The supply keeps being narrow while the demand is increasing even with that global financial crisis, they say.  Though the need for steel and oil may decrease at a economical downward tendency, the demand will still exceed the supply. The yearly produced 400 million pounds of that metal are largely consumed. It is reckoned that the need will increase with 5 to 7 %. The mining specialist Stefan Ioannou from Haywood Securities determines that the growth rather will stay at the end of that named margin – or even fall to 4 % contingent on the current turbulences. In any case, there will be a positive development, he said. Bart Melek from BMO Capital Markets sees one more indication that the financial crisis could bound the supply’s growth in the whole metal sector – including molybdenum – in the (for the producers) difficult procurement of floating capital to finance planned intentions. Meanwhile copper-mining has to be done from deeper and deeper stratums with consequently higher technical and financial effort, which causes that the supplies’ expectations are chastened. The price for molybdenum is still moving distinctly above the mines’ break even point. Molybdenum could additionally come under pricing pressure when China’s demand decreases and the trading houses as well as the fabricators deplete their stocks to save their available cash in this financial crisis. Catherine Virga from the CPM Group defers however to the current low stocks and that the demand therefore will exceed the supply. Molybdenum is going to hold up better in pricing compared to other industrial metals. Phil Newman from CRY Strategies sees molybdenum even as a “potential star”.

In response to industry demand for an exchange based price risk mechanism the London Metal Exchange (LME) will commence trading molybdenum futures in February 2010. Molybdenum will be traded in the Ring, on Select and the inter-office telephone market.  Official Prices that reflect the underlying supply and demand in the physical market are determined in the Ring and can be used by the Industry as a reference price.

Trading features

• Daily prompts to 3 months, weekly to 6 months, monthly to 15 months
• Trading via Ring, Select and Telephone
• 1 Ring per day shared between cobalt and molybdenum at 12:20 p.m.
• Kerb trading daily
• Physically settled
• Launch date February 2010

Delivery points in Rotterdam, Baltimore, Singapore

Proposed LME Molybdenum Futures Specification (MO)

• Lot size: 6 tons of molybdenum delivered in 10 tons of roasted molybdenum concentrates 
• Deliverable in 100, 200 or 250 kg drums
• Impurity levels:
  • Copper (0.50%)
  • Sulfur (0.10%)
  • Carbon (0.10%)
  • Phosphorous (0.05%)
  • Lead (0.05%)

Roasted molybdenum concentrates deliverable with a molybdenum content of 57-63 percent.