Molycorp Inc (NYSE:MCP) in an attempt to turn its fortunes, had recently acquired a deal with Siemens for providing rare earth materials for its wind turbines. Even though, the project is huge and reflects on the confidence of Siemens that MCP would be there for quite a while, it still seems to have had little progress. However, the fate of Molycorp still hangs in the balance, with investors being unimpressed by the company’s strategy.
Molycorp, unlike other rare earth miners, does not serve the needs of the Chinese industry. It has been trying to compete with it, which has been tough on the company’s finances. With most of the manufacturing businesses moving towards China, it seems like an impossible task to compete with it. However, Molycorp’s industry choice is not to blame since the rare earth materials industry is quite a profitable one. The materials have special properties, which help companies achieve amazing tasks. Nearly every manufacturing business, big or small, is making use of these materials.
Molycorp, even in this line of profitable business, has reported a loss in four of the past five years. The company lost $2.7 per share last year, after losing $2.21 in the preceding year. Spending on a new key facility for long term growth has been blamed as the cause for most of the losses in 2014. However, the main problem still traces itself back to China. The country supplies 85% of the world’s rare earth metals and uses restrictions and quotas to control its pricing. Compared to this, Molycorp’s pricing has failed to attract much interest from the industry.
The company has committed itself to a decade long trade of its rare earth metals with Siemens, but the fluctuations in pricing throughout the industry has kept things bleak. The investors seem to be happy about the deal, but the final details of the agreements are still to be released. Whether they would have a positive effect on the stock, still needs to be seen.
Molycorp Inc (NYSE:MCP) closed at $0.920 after losing 6.62% on April 27. The company has 277.96 million shares being traded in the market, with a 52-week range of $0.28-$5.15.
