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Why China Molybdenum's Shanghai IPO Made A Big Splash

Lower moly prices will likely force production cuts

The potential for oversupply is one of the reasons metals and minerals research firm Roskill Information Services is forecasting continued uncertainty surrounding moly prices. In its recently issued molybdenum market outlook to 2016, the company pointed to a number of new projects coming onstream in the coming years, and not just in China:

“There appears to be sufficient existing mine capacity in 2012 and there is an additional 140ktpy [kilotons per year] under review of relatively low cost by-product molybdenum in new copper-molybdenum mining projects. On top of this, there is another 100ktpy of potential supply in molybdenum-driven projects.”

However, Roskill also points out that demand will continue to rise, and that producers will likely lower their output. “The counter balance to this potential oversupply is that the global market for molybdenum is expected to grow by some 60ktpy by 2016. It is also highly probable that many projects on the drawing board will be delayed or postponed," the report's abstract states.

Longer term, Roskill feels that stronger growth in the US after 2013 and continued urbanization in developing countries will continue to push up molybdenum demand.

 

Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.

Why China Molybdenum's Shanghai IPO Made a Big Splash from Moly Investing News

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