On the 2nd day of the “Molybdenum week”, Armenian News – NEWS.am publishes expert opinion by the Managing Partner at Chile-based consultancy MolyExp. Mr. Bascur’s portfolio includes experience as Executive Vice-President of By-Product sales at Codelco, world’s largest copper producer (in Chile, as in Armenia, molybdenum is exclusively mined as a by-product of copper). Yesterday we spoke on molybdenum consumption in China, and today P. Bascur helps us further focus on this. Chile, another large producer, is mentioned as well.

As in case of almost all metals’ prices, China has a key role in market prices levels for molybdenum; in fact world molybdenum demand is linked to world economy growth, in particular to the investment in fixed capital, which is very strong in China and emerging economies, noted P. Bascur. As opposed to other metals like copper and iron ore, China is a large producer of molybdenum and has about 40% of world reserves.

“However more than 95% of Chinese molybdenum production comes from primary molybdenum mines and typically has higher cost than molybdenum produced as a by-product of copper, as it is in case of Armenian mines,” he explained.

For 10 years, prior to 2008, China was a net exporter for large quantities of molybdenum, typically 50-60 MM lbs Mo a year (around 25 thousand tons). This changed drastically in 2009 when China became a net importer for some 50 MM lbs Mo. According to the observation of P. Bascur, this was not due to the imbalance of production and consumption, but because of the stocking policy of Chinese entities, to benefit from low prices linked to the drastic Western destocking process.

“I estimate more than 100 MM lbs Mo were accumulated in China in 2009. Although molybdenum consumption is growing very fast in China, internal production is also growing, so it is not likely in coming years to have a situation where China becomes a net importer,” he said.

In 2010 and so far this year Chinese molybdenum investors have not shown the need to sell this extra stocks which would have depressed greatly molybdenum prices in the west, he added. Net exports in 2011 are heading for 10-15 MM lbs Mo, still much lower than in pre-crisis levels.

Compared to the beginning of 2011, molybdenum prices have remarkably declined. From $36,000 per ton in January and more than $38,000 in February, the LME price has fallen to the current $29,500 per ton. However, P. Bascur does not explain the price fall by restored net exports in China.

“In my opinion the price fall we are observing in the West is not explained by Chinese exports but again as a reaction of molybdenum users to reduce inventories to prepare for global economic situation getting worse,” he said. “It is good to keep in mind that prices seen in 2005-2008 are not representative of long term molybdenum price.”

To remind, in that period molybdenum prices touched record highs of $40 and $45 per pound (almost $100,000 per ton), and later stayed at $35/lb.

In constant 2011 U.S. dollars, molybdenum price has fluctuated in a very wide range in the last 40 years, where the yearly average has been $13.6/lb Mo and the median $8.9/lb Mo.

Answering the question about possible correlation between disruptions at copper-molybdenum mines and molybdenum prices, he told this was not observed.

“Actually, molybdenum by-production is growing significantly. In Chile 100% of molybdenum output comes as a by-product of copper. Worldwide by-product molybdenum fluctuates between 50 and 60 % of total molybdenum output”, he added.