NEW YORK (Reuters) - Freeport-McMoRan Copper & Gold Inc (FCX.N: Quote, Profile, Research, Stock Buzz) expects demand for molybdenum to remain strong, but only supply and demand factors can determine whether metal added to the market by reopening its Climax mine would cause prices to fall, said Richard Adkerson, chief executive officer of the world's largest molybdenum miner.
"We anticipate the (molybdenum) market being good. It's roughly a 450-million-lb world market and we're adding 30 million lbs to that. So that's a significant change," the CEO said to Reuters at this week's Global Mining Summit.
Adkerson was referring to the Phoenix, Arizona-based miner's plans to restart its Climax molybdenum mine near Leadville, Colorado, which has stood idle for 13 years.
Asked whether he thought molybdenum added from Climax would lower global prices, he answered, "Supply and demand. It all depends what goes on from a demand standpoint. But moly consumption has been strong."
He said he sees many positive factors in the marketplace for molybdenum, a metal used mostly in stainless steel.
"In today's world," he added, "it is also used in special alloy steels. China is a big consumer, but it's also used in oilfield drilling. Drilling wells to 20,000 feet requires special casings to be able to produce at those levels."
Molybdenum is also used as a catalyst in some chemical markets and in certain oil refinery applications.
Adkerson said Freeport would work to capture market share in both the chemical and metallic molybdenum businesses.
"It's a strong market and that has led to the price increase. Now the question is, what's going to happen as a supply response," said Adkerson.
Molybdenum oxide MLY-OXIDE-LON traded this week in London around $33 per pound, over 10 times levels seen eight years ago.
Freeport said in December it would begin major construction this spring at Climax, a pure molybdenum mine thought to be the world's largest, highest grade and lowest cost undeveloped deposit. The mining giant plans to spend $500 million to restart the project that will come onstream in 2010.
He said the company could develop Climax at twice the roughly 30-million-lb rate planned by building more mill facilities and taking other steps. An industry shortage of milling facilities has caused backlogs in molybdenum output.
"We're looking at global growth in capacity now. And we're in a great position to do it. That's why I said it's such a good business to be in," he said.
Though molybdenum is not a large percentage of Freeport's revenues, earned primarily from its giant copper operations, it is very profitable, he said.
"It's a very valuable business and it's the right kind of business that a mining company wants to have ... be the global leader, with a low-cost position, and to have an expansion opportunity instead of a development." Continued...
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