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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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The World’s Inventory Of This Rare Metal Has Quietly Fallen To Zero

Here’s a story you haven’t heard anything about. But which might vault into the headlines of the mining investment world very, very soon.

World molybdenum stocks are nearly gone.

That was revealed in data released last week from the London Metal Exchange. With a monthly report from the world’s premier metals trading platform showing that moly stocks have plunged over the last four months at a shocking rate.

As the chart below from LME clearly shows, warehouse stocks of molybdenum began to decline this past May. With the shipments of metal out of warehouses accelerating in July and August — resulting in total inventories falling to below 20 tonnes. A reduction of more than 80% in just a matter of weeks.

You can see the pattern of growing outgoing deliveries in the monthly bar chart below. All told, net outflows from LME warehouses have been 108 tonnes. 

(Click to enlarge)

The outgoing shipments over the summer are especially notable in comparison with the placid trading that LME moly saw during the previous 8 months. Both charts above show that warehouses had been mostly idle up until May — with overall stock levels holding almost exactly even since August of last year.

Perhaps most interestingly, LME reported that the drop in inventories has come as global molybdenum prices have been rising. The chart below shows how prices began to take off in early May — just as outgoing deliveries from warehouses began to pick up. Related: LNA Wrestles Control of Three Libyan Oil Ports from PFG

(Click to enlarge)

Prices have continued their strong trend up till the end of August. Having gained nearly 35% since April.

Of course, it’s hard to tell what’s chicken and what’s egg here. Metal could be moving out of warehouses because rising prices are encouraging sales. Or prices could be rising because buyers are eying the increasingly scarce supply.

Either way, this is an important situation for mining investors to keep an eye on. Watch for LME data next month to see if the drawdown is continuing — and check moly prices for continued upward momentum.

Here’s to a star rising.

By Dave Forest

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  • Bill Simpson on September 17 2016 said:
    Anybody see Kyle Bass renting warehouses?

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