Extraordinary Moly Imports By China May Shock To Its Supply Situation
Molybdenum prices have risen continuously for the last 2 weeks (08 May, Friday). Dealers' price of molybdenum oxide has risen to a level of US$8.80 per lb. of Mo as its higher side and approached US$9.00. The market prices of molybdenum have turned to a basic tone to recover.

Spot price of molybdenum oxide prevailed in the middle of April had fallen to the lowest level of US$7.70 per lb. of Mo, by which is going to bottom out. On the end September of 2008 when a crisis of the financial markets emerged suddenly, price of molybdenum oxide was kept on a very high level of US$33.50 per lb. of Mo but, thereafter, started to fall continuously for the last 7 months. The recent movements of price for molybdenum oxide suggested that funds speculated substantially in molybdenum.

Molybdenum prices are at last in the mood to bottom out but the present aspect is the first lowest and the parties concerned have different opinions in relation to a possibility of the second lowest. However, the price level of US$7 - 8 per lb. of Mo for molybdenum oxide is not payable for production cost at major mines (primary ,mines) and it has been viewed that the cost to produce molybdenum even at medium and small mines in Huludao district (Liaoning Province) of China has to be higher than US$10 per lb. of Mo and the level of US$7 - 8 is not profitable for these Chinese mines.

On the opportunity of stockpiling copper by China, copper price has rebounded from the late part of March in the international market and turned to a basic tone to recover. In the same case as that of copper, China has been positively importing molybdenum from the western markets since the beginning of 2009 and these active imports of molybdenum by China have now put an impact on molybdenum prices.

According to the customs-statistics released in China, a balance on the quantities (on material base) of molybdenum exported and imported by China in January - March quarter of 2009 was as per the table attached hereto. Namely, China imported 7.69 million lbs. on Mo content base of molybdenum in January - March quarter, which included 6.1 million lbs. of Mo in molybdenum oxide as shared approximately 80% of the whole import.

China was the country, having exported 65 - 70 million lbs. per annum of molybdenum in the past 7 years (1998 to 2004) and covered 25% of molybdenum supply to the world market. Also, China had been still exporting 30 - 40 million lbs. per annum of molybdenum during 2005 to 2008 but has suddenly turned from 2009 to the country to import molybdenum. Its key word is a sharp fall of molybdenum prices in the international market. Steel companies of China have disliked to purchase Chinese molybdenum products at high prices and shifted to import molybdenum products from overseas sources at low prices.

Apart from some of major molybdenum mines in China, small and medium molybdenum mines in China are said to have the capacity to produce 20 - 30 million lbs. per annum in total of molybdenum but have currently faced a loss in their molybdenum production because of a fall of molybdenum prices. Therefore, these sources to supply molybdenum to the Chinese market have temporarily disappeared from the front line of molybdenum sales in China. However, when price of molybdenum oxide rebounds to a level of US$12 per lb. of Mo, molybdenum mines in China will revive their molybdenum production on a profitable scale and, from this point of view, a provisional dangerous water area is supposed to be a higher price than US$10 per lb. of Mo for molybdenum oxide in the international market, because the requirements in China to import molybdenum have a strong possibility to shrink.

Considerable stocks of molybdenum purchased at higher prices and held at warehouses in China are thought to have existed in the Chinese market (19 million lbs. have been supposedly stocked). On the other hand, one analyst estimated that Freeport- McMoRan of the USA, the largest producer of molybdenum in the western world, has stocked approximately 10 million lbs. of molybdenum in concentrate, which have been accumulated during July - September quarter of 2008 to January - March quarter of 2009. In the same case as that of Freeport-McMoRan, Thompson Creek Metals of the USA seems to have stocked a large quantity of molybdenum.

There is a view in the market that, owing to a global reduction in steel production, the world consumption of molybdenum in January - March quarter of 2009 has been estimated to have had a decrease of 20% from that in the preceding quarter of October - December of 2008, and a recovery of molybdenum to be demanded in the western market is still not foreseeable. A sudden increase of the demand to import molybdenum into China has become the factor to sustain molybdenum prices but the basement in China is an intention to purchase molybdenum at discounted prices and, accordingly, an issue of molybdenum prices has been grasped by China. Therefore, a majority of this subject has been under an opaqueness.

The quantities (on material base) of molybdenum oxide imported by China from main overseas sources in January - March quarter of 2009 were <> from Chile : 4,835 tons, <> from Canada : 1,205 tons, <> from Mexico : 2,802 tons, <> from Netherlands : 838 tons and <> from USA : 561 tons, having totaled to 10,241 tons and shared 90% of the whole import. Mines and traders in main producing countries of molybdenum have rushed into the Chinese market to dispose of their molybdenum stocks. The background, which the international price of molybdenum oxide has fallen from the highest of US$35 per lb. of Mo to the lower level of US$7.70 per lb. of Mo is due to the circumstances as mentioned above.