U.S. molybdenum prices drift lower but bottom seen

NEW YORK 04 November 2009 16:29

U.S. molybdenum pricing remains volatile, but many in the trade believe that a floor has been established on the back of another market dip.

Spot prices for molybdic oxide are now in a range of $10.50 to $11 per pound, down from $12.30 to $12.70 two weeks ago, while ferromolybdenum is between $12.75 and $13 per pound, down from $13.90 to $14.10, traders said.

Moly prices have been on a roller coaster ride for the past six months. Molybdic oxide, which hit a low of $8.55 a pound in April, climbed to $18.25 in August but since then has given back about 40 percent.

"Have we fallen to the floor? Everybody is trying to figure that part out," a U.S.-based trader said. "The Chinese haven't shown too much interest in purchasing but they're not sellers either, so it's a little bit difficult to gauge what is going on."

A second trader said there's not really any spot activity to speak of as most buyers are safely covered for the fourth quarter. "But there is a growing sentiment that we've reached a bottom, but the problem is that we're entering a seasonably slow period," he said. "Things are going to be pretty sleepy here from Thanksgiving through the holidays."

Raw steel production in the United States fell last week for the first time since June, with the average capability utilization rate easing back to 62.7 percent from 63.2 percent a week earlier, according to the American Iron and Steel Institute, Washington.

"It feels like the demand for steel, looking at the utilization rates, is slacking off a small bit," the first trader said. "But that's not unexpected; we've been anticipating that November might be softer than October."

A third U.S.-based ferroalloy trader was significantly more bullish. "This ship is starting to turn around," the trader said, noting that he made a number of sales of moly oxide at $11.25 per pound. "The Chinese have come in and are buying, contrary to what other people are saying. There's a little more buying going around, just in general. Consumers are seeing a really cheap price and are being enticed to buy. I'm not seeing the lower numbers in the range anymore."

The first trader said that he hadn't seen any significant Chinese buying activity and their buying decisions would drive prices in the fourth quarter. "If the Chinese aren't buyers, then the market's going lower just based on the fundamentals and the fact that fourth-quarter (demand) is shaping up to be pretty soft. If they are buyers, depending on the extent, it could be a flat market."

However, he noted that prices won't actually go up until consumers return in bulk to the spot market. Currently, nearly all ferroalloy purchasing is being conducted through long-term contracts.

"The trade is getting a little bit ahead of this with the thought that it's bottoming. The feeling is that people are cautiously optimistic for what is going to happen in the first quarter," the trader said.