Phelps Dodge sees above-average 2006 moly price
Phelps Dodge Corp. , the world’s No. 2 copper producer, said on Wednesday it expects molybdenum inventories to remain below normal levels and the price to remain above average for the rest of 2006.
Arthur Miele, senior vice president of sales and marketing, said he was forecasting third-quarter molybdenum oxide prices of $24 a lb or better, and a 2006 average of $22 to $26 a lb.
“The market currently is near balance. However, inventories remain at very low historic levels. The outlook for consumption in the second half is for both chemical and metallurgical to continue to grow at above trendline rates,” said Miele.
The executive also said he saw molybdenum supply and demand fundamentals staying near balanced levels for 2006.
Miele spoke to analysts on a conference call after the company reported a sharp decline in second-quarter profit, after accounting for constraints from its hedging activity.
For the second quarter, Miele said, molybdenum “market fundamentals proved to be better than expected in the first half of the year, as demand for metallurgical grade moly grew at a rate well-above trendline forecasts.”
Molybdenum-containing steel production grew about 7 percent in the first half, he said, and chemical grade demand growth continued at 6 percent, as it has in the past two years.
Supply generally kept pace with demand in the first half and prices traded between $21 to $26 a lb.
Regulatory requirements for low-sulphur diesel fuel continued to drive strong chemical market growth, Miele said.
He added that the driver for metallurgical demand was strong global growth in nearly all end uses, including stainless steel, oil and gas, aircraft and construction.
On the supply side, the executive said, “There continues to be uncertainty regarding the restart of the moly mines in the Huludao region of China. It now appears unlikely that any production will be restarted this year.
“When production is brought back online,” he added, “it is expected to be at rates well below the levels produced prior to the shutdown.”
In 2005, the Chinese region produced about 5 million to 6 million lbs. Earlier this year, forecasters were looking for about 10 million to 15 million lbs of molybdenum from the region.
Chief Financial Officer Ramiro Peru said the mining company expects third-quarter sales of Phelps Dodge mined molybdenum of 17 million lbs and 2006 sales of 70 million lbs.
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