Molybdenum has seen a  rebound since the 2008 global economic crisis sent prices crashing from over $30 per pound down to $8 lows. In China, the price for molybdenum oxide is approximately $16.50 per pound, however, on the LME, the price has weakened since the start of the year, down to $35,200 per tonne. The fall in price on the LME is largely attributed to the struggling economic data in the US and Europe that is affecting many base metals.

 

In an Exclusive interview with Moly Investing News, Ken MacDonald, Vice President of Business Strategy and CFO of Erdene Resource Development (TSE:ERD), discussed the factors controlling the molybdenum market.

 

While a surplus of moly in 2011 may be a factor keeping prices at bay, the long term projections for steel demand around the globe have increased demand projections for molybdenum going forward. "All of the projections we are seeing are indicating that molybdenum consumption is around the 400 million pound range, increasing by 2020 by 300 million pounds. The CRU group and CMP have come out with similar forecasts," stated MacDonald.

 

The dramatic increase in demand predicted by 2020 will have to be met by western producers of the metal. "That means that there will have to be one to two world class moly mines coming into production in each of the next 8-9 years to meet demand," stated MacDonald, adding, "This is being driven by the steel markets, and the fairly robust forecasts for steel."

 

Over the past few years steel production has been dominated China. The rapid urbanization and increase in automotive demand in the country has been the catalyst for the yearly double digit growth in steel production. Consequently, the demand for moly to be used for the strengthening of steel alloys has risen alongside steel production.

 

"China produces upwards of half the world steel output. Based on the interest we've had from the Chinese, they are looking to secure molybdenum, as is evident with Hanlong Mining Investment's funding of Moly Mines and General Moly. This tells me that Chinese firms perceive a shortage of moly in the long term," stated MacDonald.

 

The Hanlong Mining Investment Group has spent over $1 billion to fund the projects of General Moly (AMEX:GMO)(TSE:GMO) in the US, and Moly Mines (ASX:MOL) in Australia. The Chinese firm may be concerned with the low grade moly deposits in China. Chinese moly producers are simply having to spend more capital for dwindling supply.