China Stockpiling Moly For Nuclear Plant Construction?

By Michael Montgomery—Exclusive to Moly Investing News

Over the past few articles, the story of China hoarding moly has been laid out in detail. The loans to and buyouts of moly producing firms have totaled in the billions of dollars. The stockpiles of moly in China now represent 30 percent of the total world inventory for the metal. The Chinese control 97 percent of the world manganese supplies, and are trying to secure dominance over almost all other metals. The answer to the question of why China is so aggressively pursuing such market dominance is vital to understanding market dynamics, and what are the best companies in which to invest.

China is the number one producer of steel. This may answer why they are looking to control the cost of producing steel alloys. Moly and manganese are vital to producing strong, corrosive-resistant steel. The rapid urbanization of China and the Asian sub-continent of India plays a large role in China's desire to lower its steel costs.

When the markets fell in 2008, the cost of moly dropped to $8 per pound from its high of $30 per pound, while the cost of producing moly in Chinese mines was $13 dollars per pound. Knowing that the demand for steel would rise in the future, Chinese firms started buying massive amounts of the metal, and investing in companies that had large projects worldwide. “In the first half of this year [2009], 40% of Chilean moly exports were shipped to China – there were no Chilean exports at all in the first half of 2008. And the Chinese recognise that they can stockpile the metal while it's cheap, knowing that it is critical to the energy industry,” ssays Eoin Gleesen, of Money Week. This report from 2009 was quite prophetic.

But one factor that is rarely brought up is the increasing role of nuclear reactors in the global energy crisis. The reactors need extremely high quality steel tubing to deal with the unique aspects of this form of energy production. As a result of the growing trend towards nuclear power, the importance of moly has never been greater.

“Nuclear power utilities, for example, rely on super-resistant moly alloys to replace the world's aging reactor condenser tubes. Each new reactor will need at least 400,000 pounds of the stuff. Around 100 new reactors are scheduled for construction in China over the next few years. America, meanwhile, is hoping to build twice that many,” reported Gleesen.