Morgan Stanley Maintains Overweight on Molycorp Despite REO Prices

Morgan Stanley has published a research report on Molycorp MCP commenting on REO prices that are currently down 25% year to date and believes that prices have reached a level that will drive demand. In the report, Morgan Stanley writes, "While REO inventory in China and illegal mining could prolong the price decline, we sense an increase in interest from consumers. Japanese REO imports normally pick up in March-May. We expect a seasonal pickup in demand to help stabilize prices by mid-2012. At $55/kg, spot prices are in the range where price-sensitive buyers may start returning, based on our channel checks." Morgan Stanley reiterates its Overweight rating and $81 price target on Molycorp, which closed Friday at $24.55.