Monday, June 28, 2010
Tight Moly Supply - G20 with the Sound Off
It is 5:44AM. Grab a cup of Monday java and let's get to work. A faithful reader contributed a terrific link to an article on the tight global moly supply in our Weekly Molybdenum Summary below. Be sure to check it out before you leave the break room today.
If you found yourself in front of the television this weekend, the World Cup was a lot more exciting than anything coming out of the G20 meetings in Canada. As cars burned in Toronto, I watched press conferences of the world leaders with the sound off. Perhaps the ole Colonel is getting too cynical about their lofty pronouncements about the future fate of the global economy. My view is that if copper can stay somewhere above $3/lb and oil doesn't get too crazy (either up or down), somebody is doing the right thing; if not, run for cover.
For the record this is how the Wall Street Journal reported the meetings in Canada:
"Leaders of the wealthiest Group of 20 nations showed common resolve to contain budgets and ballooning debt levels while ensuring that the global recovery remains intact.
The G-20 also pledged to stick to the 2012 timetable to implement tougher capital and liquidity standards for banks, with standards converging after initial variation. Attempts at reaching consensus on a bank tax to pay for bailouts failed, however, with governments essentially agreeing to disagree by choosing their own approaches." (WSJ, 06/28/2010)
Ho-hum. COMEX copper is down a thin flat washer this morning from Friday's close ($3.0970) and oil is pulled back a quart to $78.10/bbl. The London Metal Exchange (LME) reports, "Metals maintain strength in open-outcry sessions, risk in vogue." I guess global recovery is still on track by my measure. The Eureka Miner's Index (EMI - what's this?) showed some recovery too at the close of last week just making it above par (100.9):
The broader markets are open now and it appears metals & miners are pulling back some with the EMI dropping to a sub-par 95.85. The 10-year Treasury yield (an input to the EMI) is telling us something this morning at a super low 3.044% yield. Investors are still seeking safe haven in U.S. Treasurys signaling that risk is not in "vogue" for everyone. The VIX (what's this?) is creeping back to the 30 level again too (29.65) reminding us that there is still some fear in these markets. Talk about being on the cusp - go copper!
Gold (orange) and the dollar (blue) have re-established their inverse relation since early this month which I interpret as a bullish sign for commodities:
Let's checkout our resilient and unflappable Miss Moly...
Molybdenum Weekly Summary
Here is an excellent view on the moly market moving forward in a tight supply condition:
An Exceptional Metal for 2010: Molybdenum (TheStreet, 6/25/2010)
Molybdenum prices remain in a narrow range with Western moly oxide within a buck or so of European moly and LME futures seller contracts.
Western Moly Oxide (FeMo65) remains at $16.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)
Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) moves down to 15.00/lb (the price reported in the Metals Bulletin)
LME Futures Contracts
LME cash seller moves down to $32,500/metric ton $14.74/lb
3-Month (Buyer) $32,000/metric ton $14.06/lb
3-Month (Seller) $33,000/metric ton $14.97/lb
15-Month (Buyer) $32,000/metric ton $14.06/lb
15-Month (Seller)$33,000/metric ton $14.97/lb
Here is a chart of the LME 3-month contract (seller) from the February launch to the present:
Enough G20 high falutin talk, let's walk the walk:
Our newly minted Eureka Miner's Index (EMI - what's this?) is sub-par at 95.85; down from Friday's 100.91 but up from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners.
4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners remain on shaky timber with benchmark FCX trading in the the mid-$60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment
The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb
The YELLOW light is turned on for Stable Markets the VIX too close to the 30 level for comfort (what's this?)
The YELLOW light is turned back on for Investor Confidence as the specter of further market corrections remains
The GREEN light remains turned on our Fuel Gauge with oil below $80
A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
NYMEX/COMEX: Oil is down $0.76 in early trading to $78.10 (August contract, most active); Gold is down $2.6 to $1253.6 (August contract, most active); Silver is down $0.010 to $19.100 (July contract, most active); Copper is down $0.0140 to $3.0970 (September contract, most active)
Western Molybdenum Oxide is at $16.00; European Molybdenum Oxide is at $15.00; LME moly 3-month seller's contract is $14.97, LME cash seller is $14.74
The DOW is down 15.23 points to 10,128.58; the S&P 500 is down 3.19 to 1073.57. The miners are down:
Barrick (ABX) $46.10 down 0.50%
Newmont (NEM) $61.40 down 0.44%
US Gold (UXG) $5.15 down 2.53%
General Moly (Eureka Moly, LLC) (GMO) $3.35 down 0.30%
Thompson Creek (TC) $10.15 down 1.93%
Freeport-McMoRan (FCX) $65.25 down 1.98% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are mixed, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $29.65 up 0.10% - global steel producer
POSCO (PKX) $101.54 down 1.90% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 0.93% to $1,410,972.58 (what's this?).
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Headline photograph by Mariana Titus