Moly producers need rally in steel making to prosper

Molybdenum: A world over-supply of molybdenum is mainly affecting primary producers such as Amax’s Hendersen mine in Colorado and Placer Dome’s Endako mine in British Columbia.

Widely used in the steel and foundry industries, molybdenum, like other metals, has suffered drops in consumption with

the decline in economic output. Oxide prices have declined steadily to US$2.10 per lb. from the US$2.25-2.30 level in January.

Producer estimates recently given in Japan for the Western world indicate production and imports to be 183 million lb., consumption to be 178 million lb. and excess stocks to be four months consumption or about 66 million lb. In the longer term, a pickup in the Western economies and in steel and alloy production should improve market conditions, metal prices and revenues by 1993. Meanwhile, the pressure is on the primary producers to cut back, since molybdenum byproduct output from copper mines is unlikely to decline unless copper prices sag substantially.

Output from byproduct mines and other planned-economy mines, plus new exports from Russia, increased again in 1991 to 134 million lb. from 125 million lb. in 1990. The 1992 forecast is 122 million lb. from these sources, based, at the moment, on a drop in 1992 copper production.

Nickel: An expected furnace shutdown for maintenance at SLN in New Caledonia, lower than expected arrivals of Russian nickel in Europe, ongoing labor strife at Western Mining in Australia, Inco’s shutdown of its Shebandowan mine and one-week summer shutdown extension, and drops in output announced by the Japanese refiners hardly stirred the nickel market. To date, April LME prices for spot metal have remained around US$3.35 per lb.

On a more positive note, the sharp climb in LME stocks appears to have peaked at 26,000 tonnes. However, the stall in the Japanese market, which consumes as much nickel as the U.S., is being watched closely. Steel mills there are now only ordering on a spot basis as they await a turnaround. The pickup in the U.S. economy continues and nickel consumers are busier. German steel mills, which account for 40% of European nickel consumption, are still slow.

Because of low generation rates, world stainless scrap prices are firm, in the range of US$775-850 per ton. The calculated nickel value in scrap is just slightly below LME prices for virgin material. With the rigor being shown by producers and an economic pickup, nickel prices should react strongly when buyers re-enter the market.

Copper: Mid-April LME stock levels declined slightly to 318,000 from 327,000 tonnes at the start of the month. Average LME cash prices continue to trade around US$1 per lb. Production problems at mines in the U.S. and Chile, and reduced mine output because of increased civil unrest and lingering drought in central Africa, continued to help maintain a reasonably balanced market. However, unlike lead and zinc, copper prices have yet to signal a turn from their long downtrend.

— Jack Dupuis is a minerals marketing consultant based in Thornhill, Ont.