NEW YORK (TheStreet) -- Molybdenum prices may trend higher during 2010 as companies struggle to increase output. The metal may spike by 31% by the end of the year to reach $19 a pound, according to CPM group.
Molybdenum production is concentrated in a handful of companies, with top four companies accounting for 47% of global production in 2009. In comparison, the top five companies accounted for less than 38% of global aluminum and copper production.
Molybdenum is typically produced as a by-product of copper production. Major copper producers that produce molybdenum include
Freeport-McMoRan Copper & Gold
(or Corporación Nacional del Cobre de Chile, which does not trade in U.S. is the world's largest copper producer),
, which owns 54.2% of
( RTP) and
, which contributed to around 12%, 11%, 10% (Grupo Mexico combined with SCCO), 6%, and 4%, respectively, of the total production in 2009.
Primary molybdenum producers,
, accounted for around 6% and 4%, respectively, of total molybdenum production in 2009.
China, the U.S. and Chile, the three largest producers, accounted for 36%, 24% and 18%, respectively, of global production in 2009.
During 2009, while molybdenum production was slashed at high-cost mines in China, the credit crunch compelled Freeport to cut back production and defer new projects, narrowing molybdenum surplus in 2010. Currently, limited incremental production is available as a by-product of copper production. The current under-investment in molybdenum capacity will reduce the metal surplus, supporting higher molybdenum prices.
In addition to the existing supply shortfall, the bulk of new copper mine capacities expected to come on stream do not have recoverable molybdenum, as they are slated to use leach solvent or electro-winning processes, both of which will limit molybdenum supply.
On the other hand, primary molybdenum producers, accounting for nearly half of metal production, have acted as swing producers by tailoring production in response to demand and prices. However, during 2009, both primary producers and a few by-product producers quickly adjusted supplies in response to demand decline, thereby pre-empting an inventory buildup. Such quick production shifts by both primary and by-product producers will likely sustain the market in tight balance during the upcoming years, thereby supporting higher metal prices.
Overall, the metal's surplus may decline to 9 million pounds this year from 27.4 million pounds in 2009. Analysts anticipate the metal to be in deficit by 2011 on the struggle to add further capacities.