China Molybdenum Says Shortage to Support Prices (Update1)
By Helen Yuan
Aug. 27 (Bloomberg) -- China Molybdenum Co., the nation's second-biggest producer of the metal used in steelmaking, expects a global shortage of 2,000 metric tons this year will prevent prices from falling.
Production may decline in Chile and China, ensuring that a deficit will last for ``quite a while,'' General Manager Wu Wenjun said today at a conference in Hong Kong. Wu in April forecast a deficit will last until 2010.
The estimated shortage, about 2 percent of global output in the first half, may bolster molybdenum prices that have already jumped fivefold in the past five years as demand for oil steel pipes surges. China may raise demand of the metal by 24 percent this year, larger rival Jinduicheng Molybdenum Co. said in June.
``The domestic market will maintain rapid growth in the second half,'' Wu said.
Molybdenum prices have gained 4.7 percent this year to $33.75 a pound, according to Metal Bulletin.
Shares of China Molybdenum gained 5.7 percent, the biggest increase since July 9, to close at HK$5.05 in Hong Kong. China Molybdenum's shares have fallen 65 percent this year, compared with a 23 percent decline in the benchmark Hang Seng Index.
The Luoyang-based company this week posted a 13 percent gain in first-half profit.
China Molybdenum plans to raise domestic sales as export tariffs reduce earnings from overseas, Wu said. Chinese stainless steelmakers may add production in the second half, he said. China Molybdenum also will increase sales to the heavy machine and military industries.
China's stainless-steel producers, led by Shanxi Taigang Stainless Steel Co. and Baoshan Iron & Steel Co., only produced 2.51 million tons of the rust-proof alloy in the first half, compared with 6.67 million tons for the whole of 2007.
China Molybdenum gets 77 percent of its domestic sales from Taigang, Baoshan, Zhangjiagang Posco Co. and Wuhan Iron & Steel Co., Wu said.
The company's production of molybdenum concentrate rose 17 percent to 16,753.7 tons in the first half from a year ago, and molybdenum oxides gained 28 percent to 13,021.8 tons, the company said in its interim report on Aug. 24.
It plans to make 17,000 tons of the concentrates and 12,000 tons of molybdenum oxides in the second half, Wu said.
China Molybdenum is also seeking acquisitions of rare and precious metal resources in territories including Inner Mongolia, Canada and Australia, Wu said, without giving details. The company also plans to increase tungsten production, he said.
China's apparent consumption for molybdenum surged 72 percent in the first half of this year to 11,807 tons from a year earlier, the company said Aug. 24.
Apparent demand is calculated from output and net imports and excludes inventories held.
To contact the reporter for this story: Helen Yuan in Hong Kong at email@example.com