Future or No Future: Siblings Molybdenum and Nickel

Both molybdenum and nickel are used in the production of steel. Yet, the price of each has fared quite differently the last three months. Molybdenum has tumbled from a high of $18 to $12, hurting my previous favorite Thompson Creek (TC). In contrast, nickel has steadied at $8.69.
Why the difference in price trends? Could nickel be benefitting by strong demand? Certainly that's not the case as rising LME stocks show. In fact, nickel inventories are reaching all time highs. Stores have gone from under 10,000 to over 120,000 as production outpaces demand.
And the last three months LME inventories have shown no let up, just overflowing nickel stocks.
So why the discrepancy between nickel price and rising stocks? Why is nickel holding up while molybdenum is crashing?

I think it's due to the "animal spirits" of commodity traders who are willing to bid up nickel in the face of weak fundamentals. Future traders seem to be looking at the weakening U.S. dollar and buying every commodity in sight: copper, oil , nat gas (UNG) regardless of demand and supply. That doesn't exist in the world of moly, a mineral that lacks a futures market yet has world wide applications.

One wonders whether nickel and other commodities will follow moly's lead and tumble.

Disclosure: No position.

Comments

[dj kumquat:]

i feel your pain, but hang on to (or add more of) that TC.

Oct 26 04:09 AM

[john s. gordon:]

bubble in nickel? why not, everything else has its bubble (except empty houses in detroit).
> jack

Oct 26 08:43 AM

[Wildebeest:]

the reason probably is because of the way the two are traded. Nickel is traded on a liquid metal exchange. Moly is traded by contracts between suppliers and producers. Moly is thus more likely to be reflective of the real economy at the moment eg. speculators aren't a party to the moly contracts. FWIW moly and cobalt will be traded on the LME in 2010.

Oct 26 11:38 AM

[Wildebeest:]

On Oct 26 11:38 AM Wildebeest wrote:

> the reason probably is because of the way the two are traded. Nickel
> is traded on a liquid metal exchange. Moly is traded by contracts
> between suppliers and producers.

I mean producers and end users of course :)


Moly is thus more likely to be reflective
> of the real economy at the moment eg. speculators aren't a party
> to the moly contracts. FWIW moly and cobalt will be traded on the
> LME in 2010.

Oct 26 11:39 AM

[jimmy46:]

That doesn't exist in the world of moly, a mineral that lacks a futures market yet has world wide applications.""""""

If anyone doubts that it is speculators that have doubled the price of oil this year, look here.

Oct 26 01:32 PM