[[ Check out my Wordpress blog Context/Earth for environmental and energy topics tied together in a semantic web framework ]]

Wednesday, March 09, 2005


Smiley from the PeakOil board posted on resource supply/demand inelasticity:
It is often said that the problem with predicting oil prices is that we have never seen a structural deficit of an important industrial commodity.

Perhaps I found an analogy with oil, molybdenum. Molybdenum is a metal which is used in steel production. Since 2002 supply demand balance swung to the demand side. The demand has outgrown the supply.

This deficit has had some very interesting consequences for the price. over the past three years the price of molybdenumoxide has increased from $2 to $28.50, a fourteenfold increase . Since the speculative position on this market is relatively small we can assume that these prices reflect the real supply demand fundamentals. It is staggering to see how a relatively small supply shortage can lead to these enormous price increases. It really shows how inelastic these markets are.

I think the steel market and the oil market are fairly comparable when it comes to inelasticity. If so then this is what we can expect for oil when the market runs into a deficit. The price increases we have seen so far are nothing compared to what is going to happen.

If moly is of any guidance we can expect the price to suddenly double, triple or quadruple when a real shortage occurs. That is a pretty scary thought.
Doing a bit of research on this topic, it looks as if the price of molybdenum becomes inextricably tied to how much copper mining occurs. Apparently, molybenum gets collected along with the copper ore, and if copper demand slumps (as it has recently, internet bubble bursting and all that) so to the molybdenum supply decreases, and therefore the price of molybdenum rises.


Anybody that has done high-tech vacuum science work knows the many ways molybdenum gets used. Pure molybdenum has some weird properties. If we want some tough high-T structures that we wish to spot-weld stuff to, the choice is between tantalum and molybdenum. You can only bend molybdenum a few times before it breaks (that's real inelasticity for you), but tantalum has more flex to it. (Curiously, tantalum has its own set of supply/demand problems due to all the African in-fighting over the valuable ore -- link)

In the other place it gets used, as a bolt lubricant, we know that research labs end up using lots of molybdenum disulfide (vacuum scientists refer to this as "moly"). If molybdenum disappeared, physical science research would definitely feel it, same as with an impending helium shortage.

And weird enough, but bicycle manufacturers actually paid attention to the molybdenum shortage:

Gira bike manufacturer ponders profitability over molybdenum shortage

Chrome-moly frames used to have more popularity than they do now, but still, I found it fascinating to read how they analyze and adapt to this shortage.


Professor Blogger Show Me The Love said...

MPH Ventures Corp. (TSX-V: MPS) is a
gold, silver, and molybdenum exploration company focused on mineral development within Canada and Latin America.

The Company has acquired a significant asset with a historical (Non NI 43-101 compliant) drill indicated and inferred resource known as the Pidgeon Molybdenum Deposit from BHP Billiton and Goldcorp located in the Echo Township, Kenora, Northwestern Ontario.
The most extensive work on the Pidgeon Molybdenum Deposit was conducted by Rio Algom and Dickenson Mines in the late 1970's, which was subsequently acquired by BHP Billiton and Goldcorp (respectively) through ongoing mergers and acquisitions. With the existing near surface molybdenum deposit open in all directions, MPH Ventures believes the potential to increase the probably reserves warrants immediate exploration on the project. MPH Ventures commissioned Wardrop engineering Inc, to complete a National Instrument 43-101 compliant report on the deposit and confirmation drilling commenced November 2007.

MPH Ventures is also earning a 50% interest in Lateegra Gold's 4,915 hectares mining concession under the name M10 massive sulphide prospect, located in the Pichincha Province 50 kilometres west-southwest of the Capital, Quito in Ecuador. The M10 property was identified by Ing Fredy Salazar, who spent several years as a senior geologist for Newmont Mining, and provided consulting services for Aurelian Resources. Mr. Salazar was instrumental in the identification of the land package known as the Condor project held by Aurelian Resources located in the emerging gold belt in southern Ecuador.

The exploration target on the M10 concession covers a potential strike of 7.5 kilometres based on a continuation of the La Plata polymetallic volcanogenic massive sulphide (VMS) trend, where mineralization occurs at or near the north-south trending contact between intermediate and felsic volcanics.

MPH Ventures Corp. continues to aggressively seek mineral exploration projects in Canada, as well as within Ecuador and Peru.

2:09 PM  

Post a Comment

<< Home

"Like strange bulldogs sniffing each other's butts, you could sense wariness from both sides"