Monday, February 22, 2010
Moly Miners on a Roll, Oil Breaks $80
It is 5:35 AM, grab a cup and let's get to work. This could be an exciting week for molybdenum; the London Metal Exchange (LME) kicks off moly futures trading today, moly and nickel prices are up and moly miners are on a roll. Before we go there, take note that our Fuel Gauge light on the Eureka Outlook Dashboard (to your right) has turned yellow. Oil closed 6 cents above $80 Friday (NYMEX April contract, most active) and is holding above this benchmark level in early trading. As reported by the Wall Street Journal this morning some of the old oil bugaboos have returned to the marketplace:
"Oil prices have been buoyed in recent sessions by a weaker dollar, reduced production at the North Sea Buzzard oil field, refinery strikes in France and concern over Iran's nuclear intentions, London-based brokerage PVM Oil Associates said. 'Throw in to the mix a good technical outlook,and the week is beginning on a potentially very strong note,' it said." (WSJ, 2/22/2010)
Remember that "good technical outlook" fares well for oil traders less well for you, me and miners with fuel costs chewing on their margins. In the big picture, a rise in oil prices is part of a revived commodity reflation that has also helped boost metal prices after a scary period of uncertainty earlier this month. Copper is back to solid $3 territory, molybdenum and nickel continue their rise together as shown in this 1-month chart:
Our favorite moly miners, General Moly (GMO) and Thompson Creek (TC,) have had a strong bounce from their early February lows:
General Moly 2/8 closing low:$2.12 This morning's open:$2.68 up 26.4%
Thompson Creek 2/4 closing low:$11.26 This morning's open:$13.63 up 21.0%
This is a good pair to watch because GMO is in a pre-production mode while TC is a major pure play molybdenum producer. Freeport McMoRan (FCX), a bellwether mining company producing copper, gold and moly, has recovered too but with less gusto:
Freeport McMoRan 1/29 closing low:$66.69 This morning's open:$77.52 up 16.2%
Miss Moly started trading at the London Metal Exchange (LME) this morning (Miss Moly Flies to London). The Report will follow her adventures and I must admit the Colonel got a little excited on the news that Asian traders were lining up to ask her for a dance last night (already Monday in their time zone).
The steelmakers have recovered too but face increasing input costs as reported by Steel Business Briefing:
"Rising prices for iron ore, coal and scrap could add $150-160/tonne to the cost of producing hot rolled coil and wire rod starting from the second quarter of this year, industry executives in Europe tell Steel Business Briefing.
A senior source close to ArcelorMittal says such cost increases will make it necessary for all steel companies to raise prices significantly. While it is not yet clear how mills will apply it, the price rises already announced for quarter 2 will not cover the rise in costs." (Steel Business briefing, 2/22/2010)
Here is how our steelmakers have done recently:
ArcelorMittal 2/12 closing low:$37.43 This morning's open:$39.64 up 5.90%
POSCO 2/8 closing low:$108.23 This morning's open:$120.6 up 11.4%
What does all this mean Colonel? I think something very positive is going on with molybdenum reflected in its recent rise in price and the related bounce in the stocks of moly miners. By comparison the recovery of more diversified miners (e.g, FCX) and the steelmakers (MT & PKX) has been solid but less spectacular. It is a little early to sort out all the pieces and if sovereign debt worries return to the headlines or oil goes ballistic, I may be reporting a very different story. Exciting times buckaroos, let's keep Miss Moly's dance card full and our local moly miner on a roll.
Enough talk, let's walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)
A YELLOW light is ON our fuel gauge with oil over $80
An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is up $0.38 in early trading to $80.44 (April contract, most active); Gold is down $0.8 to $1121.3 (April contract, most active); Silver is down $0.68 to $16.345 (March contract); Copper is down $0.0290 to $3.3280 (March contract); Molybdenum edges higher to $17.25
The DOW is down 14.43 points to 10387.92; the S&P 500 is down 1.71 points to 1107.46. The miners are mixed:
Barrick (ABX) $38.61 down 1.93%
Newmont (NEM) $47.60 down 1.94%
US Gold UXG) $2.65 down 0.38%
General Moly (Eureka Moly, LLC) (GMO) $2.66 up 0.76%
Thompson Creek (TC) $13.66 up 0.59%
Freeport-McMoRan (FCX) $76.75 down 0.53% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $39.62 up 0.61% - global steel producer
POSCO (PKX) $119.78 up 1.68% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 0.18% to $1,278,497.88 (what is this?).
Headline photograph by Mariana Titus
The inset molybdenum symbol was designed for Metalprices.com by the artist Murray Robertson. The design is influenced by historical symbols used in the ancient science of Alchemy. This creative molybdenum symbol is adapted from lead as these elements being of similar appearance were often mistaken for each other.