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Moly market in short term surplus
Feature article
We review the recent supply/demand dynamics in the molybdenum market.
Latest news
Base metals fell in Wednesday trading as weak data from the US and rising
CDS rates on Euro periphery sovereign debt saw the US$ rise and safe
havens like gold strengthen on the day. Copper was the most resilient of the
base metals, recording a modest 0.2% drop.
US industrial production rose by 0.1% MoM and 3.4% YoY, with
manufacturing faring better, rising by 0.4% MoM and 3.7% YoY. Motor
vehicles and parts continue to weigh on activity, although this seems to be
more to do with parts, with auto assemblies rising a little to 7.88m annually.
The Empire State Manufacturing Survey for NY slipped below zero,
suggesting a contraction in activity. This is the first regional survey for the US
released in June and suggests the risks to the ISM survey to be released at
the start of next month could be skewed to the downside.
Anglo American has confirmed that it has no plans to sell a stake in the first
stage (26.5mtpa) of its Minas Rio iron ore project. At Metal Bulletin’s iron ore
symposium, it confirmed that all major permits had been approved and that
the mine would make its first shipment in 3Q 2013.
The International Lead & Zinc Study Group's (ILZSG) latest data suggest the
world zinc market was in surplus by 166,000t in the first four months of this
year, which was similar to the reported surplus of 178,000t in the
corresponding period of 2010. ILZSG estimates that world refined zinc
consumption increased by 3.8% YoY to 4.093mt. However, we think this
increase is understated, primarily due to differences in estimates of the
market in China. ILZSG estimates that China's zinc consumption increased
by 7.3% YoY in the four months of January-April 2011. However, we note
China's production of galvanised steel sheet was up by 13.6% to 9.4mt on the
same comparison. Galvanising steel is the main end-use market for zinc.
Human Rights Watch published a critical report on lead pollution and
poisoning in China as a result of allegedly poor environmental practices at
some lead smelters/refineries and some plants making lead-acid batteries,
documenting almost 20 reported incidents affecting several thousand people
in the last two years. The Chinese government is responding with a
campaign to crack down on substandard operators, which is, of course,
welcome from a human perspective, while also raising risks for metal supply
in a market in which end demand remains solid. Meanwhile, Ivernia has said
that its Magellan lead mine in Western Australia, which has been idled for an
environmental review, will not restart before October at the earliest. Magellan
produced ~44,000t of lead-in-concentrate in 2010, and had been planning to
produce ~85,000t in 2011, which would have been equal to ~2% of world lead
mine output.
