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MOLYBDENUM 17 Table 7 .-Time-price relationship for molybdenum in that of Climax concentrate . 1lowever, in re- concentrate,' 1954-77 sponse to strong worldwide demand during Average annual price . dollars per pound 1978, other producers began to list prices for Based on concentrate and other products higher than the Actual constant Year price 1977 dollars Climax price quotes . In addition, U .S . producers 1954 1 .05 2 .49 initiated a two-tiered price system in which 1955 1 .10 2 .55 1956 1 .18 2 .66 prices for exported materials were set higher 1957 .1 .18 2 .57 than for domestic sales . 1958 1 .25 2 .68 1959 1 .25 2 .62 The prices of other molybdenum products are 1960 1 .25 2 .58 1961 1 .40 ' 2 .86 also quoted on a contained-molybdenum basis 1962 1 .40 2.81 1963 1 .40 2.77 and reflect, at least partially, the cost of conver- 1964 1 .55 3.02 sion . Technical-grade oxide, the major form of 1965 1 .55 2.95 1966 1 .55 2 .86 molybdenum sold commercially, varies in price 1967 1 .62 2 .90 1968 1 .62 2.78 among the major producers depending on pu- 1969 1 .72 2.61 1970 1 .72 - 2.67 rity, type of packaging, and whether it is bri- 1971 1 .72 2.54 quetted . Over the last 5 years, producer oxide 1972 1 .72 2 .44 1973 1 .72 2 .30 prices have ranged from 7 to 12 percent over 1974 2 .02 2 .47 1975 2 .48 2 .76 the concentrate price . 1976 2 .94 3.11 1977 3 .68 3.68 As of January 1979, Climax Molybdenum Co . 1978° 4 .52 4 .21 listed oxide, in cans, at $5 .55 and ferromolvb- $ Li f771 ( ' q6 ,. 6c ~ P Preliminary . G denum at $6 .38 (both per pound of contained 1 Prices are weighted averages for each year. Price changes in 1977 and 1978 : Aug. 1, 1977, $4 .01 ; March 7, 1978, $4.41 ; Sept. 1, 1978. $4 .95 ; Dec . 29, 1978 . molybdenum) for domestic sales. A domestic 15~t- $5 .19 (calculated based on 4.75-percent increase from previous price) . price for concentrate was no longer listed, but an approximate price of $5 .19 was calculated istration (GSA) . However, since 1963, these ma- based on the percent increase in domestic prices terials have been sold from the stockpile because on other materials for the last price change in domestic reserves and production capacity were December 1978 . Climax's export prices were as considered adequate to supply national emer- follows : Concentrate, $5.86 ; oxide, $6 .56; and gency needs . By yearend 1977, no molybdenum ferromolybdenum, $7 .71. Other major L .S . remained in the stockpile . Revised stockpile producers listed prices for oxide and ferrotno- goals announced in October 1976 and reaf- lybdenum above the Climax price quotes . firmed in 1977 by the Federal Preparedness Although the bulk of producer sales are made Agency (FPA) of GSA did not include molyb- at listed prices, it has been reported that during denum materials . periods of oversupply in past years some dis- Although adequate to supply potential in- counting prevailed, particularly for byproduct creased needs in wartime, capacity is concen- concentrate and oxide . In contrast is the current trated in relatively few mines and conversion situation of somewhat restricted supplies and plants. Interruption of normal operations at the byproduct oxide prices that exceed the Climax major mines and plants due to accidents or labor list price . The strength of the 1978 market was problems would significantly reduce availability . also attested to by dealer prices for oxide, which have been listed as considerable premiums over ECONOMIC FACTORS AND PROBLEMS producer prices since 1976 . Materials supplied by dealers represent, however, a relatively small fraction of total domestic consumption . Pricing Prior to 1974, producer prices for molybden- ite concentrate and other products were char- Table 7 shows the time-price relationship acterized by marked stability . Particularly since 1954 for molybdenum contained in con- noteworthy was the 5-year interval froth 1969 centrate in actual dollars and based on constant to 1973 during which listed prices remained 1977 dollars . Actual prices are based on the pub- unchanged . The 1973 average price for molvb- lished price of the major producer, Climax Mo- denum in concentrate, when adjusted for infla- lybdenum Co . Historically, prices quoted by the tion, was lower than it had been for the previous other large producers have not varied appreci- 20 years . During this period, the applications ably from the Climax price, although byproduct and demand for molybdenum were consider- producers generally have listed their concen- ably expanded . trate at prices slightly lower than that of Climax . The presently prevailing market of' generally The lower price was due to either lower tnol- tight supply-demand balance and rising prices ybdenite grade or higher impurity content than began in 1974 . Since early 1974, the price per J. C. ASARCO i.icorpura&ed r D .;I Exploration Department OCT 1 8 1979 T. C. Osborne Vice President uw Exploration October 16, 1979 Mr . J . H . Courtright Tucson Office Molybdenum Dear Mr . Courtright : Thanks for your memorandum of October 4 . I have no trouble with the concept that the Amax current molybdenum market price has a good chance of keeping up with inflation over the long-term . As pointed out in "Moly Study", molybdenum could be sub- ject to periodic disruptions in the general pattern because a single new major molybdenum mine can readily produce 10%-25% of present world demand . (Compare this with copper, wherein a major new copper producer of first rank might produce 2% of current world demand) . "Lumpiness" of the molybdenum supply stream has been a factor in prices in the past and will likely affect prices in the future from time to time over relatively short-term periods . For practical purposes in evaluating possible new molybdenum invest- ments at any particular time, I think we should use the current Amax molybdenum price at that time and current capital and operating costs . As far as I know, this has been our consistent policy in the past . I think we also all agree we should not use spot molybdenum prices (although these may be very substantially higher than the Amax price as they have for the past several years) because to do so for invest- ment decisions would be frankly speculative . Speculation in commodi- ties is a perfectly good way to make money but it is not a business Asarco knows much about . Further, one rule in commodity speculation is to stay liquid, and a mine is of course about the least liquid way of tying up money there is . I realize your memorandum in no way suggests that we should use spot prices for long-term investment decisions, and am just throwing this discussion in because it is hard for everyone including myself not to be impressed with the current molybdenum profits we are making on what normally is a relatively minor by-product . Very truly yours, o . - T . (~. Osborne cc : WLKurtz DMSmith JCBalla FTGraybeal (all w/copy of Mr . Courtright 's Memo) REGale ASARCO Incorporated 120 Broadwa y New York, N .Y 10005 (212) 732-9500 Telex: ITT 420585 RCA 232378 WUI 62522 Cables: MINEDEPART Telegrams :WU 1-25991 w Exploration Department--j~ V October 4, 1979 -MEMO FOR-----T- .--C . Osborne"° -FROM-1,- J.- . Gourtright MOLY P-e-a-}}s--y-ou--have--sin `~t.he recent USBM publication ----- "Molybdenum" by John T . Kummer, May 1979P -In._any-case., Some of the more important aspects o- . are summarized below .,/ .~ In contrast to "Moly Study" (my memo of 6/1/79), "Molybdenum" contains the results of research on demand which is broken down into six end-use categories for consumption in the USA : Lbs Mo x 1,000 1977 Forecast year 2000 Transportation 13,000 46,000* Machinery 21,000 42,000* Oil & Gas Industries 9,100 34,000* Chemicals 7,100 24,000* Electrical 5,200 12,000* Other 6,000 12,000* As may be noted, the most rapid growth rates forecast is in transportation, chemicals, and the oil and gas industries .