The battery market is also sound, with US sales of hybrid vehicles rocketing, due to high petrol prices and stricter emission targets. Cobalt is used in significant quantities in both nickel and lithium-ion batteries, which are the main technologies in use.
London, 21 February 2008 - Business in top-quality cobalt was taking place freely on Thursday at $52 a pound, the highest price paid since 1978, and, given the bullish sentiment and compelling fundamentals in the market, it is only a matter of time now before the all-time peak of $53.25 is exceeded.Today, traders were reporting 99.80 business at $52.00 a pound — with metal sold to consumers in Europe, as well as in the important Japanese market..
The free-market price for high-grade rose $0.50 to $51.50/52.50, while Russian 99.30 percent was around $46.00/48.00. The latest increase mirrored producer trends - earlier this week, producer BHP-Billiton sold five tonnes of 99.80 percent cobalt in Europe at $51.00 and hiked its offer by $1.50 a pound to $52.50 for five tonnes of February metal.
“The cobalt market seems to have broken out of its cage now,” a trader said.
During January the market had flat-lined after a sharp end-2007 rally, when prices rose 79 percent from nine-month lows of $24.00/25.00. But fundamentals are firm — supply is tight in the 65,000-tonne a year market and demand is racing ahead and a deficit is on the cards.
“It is a move up by steps now, which is healthy. What we saw allowed some people to take profits,” a senior trader said.
“Now we have the situation where the cheap metal is not there and the consumers who held off will have to come in and buy,” he added.
STRONG DEMAND PICTURE, SUPPLY TIGHT
Standard Chartered Bank said in a recent report that cobalt’s recent strength was due to a combination of factors, with demand consistently strong — the major drivers have been a boom in the aerospace sector, as well as rapid growth in Asia.
Airbus deliveries rose four percent, while Boeing deliveries jumped 11 percent. There is also a massive order backlog which represents pent up demand for cobalt. Airbus currently has a six year backlog, while Boeing has enough orders for five years.
The battery market is also sound, with US sales of hybrid vehicles rocketing, due to high petrol prices and stricter emission targets. Cobalt is used in significant quantities in both nickel and lithium-ion batteries, which are the main technologies in use.
The current tight supply picture could be exarcabated further if African production is hit by power problems. In Zambia, in late-January blackouts occured, and the state power utility Zesco had to ration electricity supplies, with copper producers curtailing output.
Cobalt is a by-product of the copperbelt producers — the Mopani mine has the capacity to produce 2,200 tonnes a year of metal, while Chambishi accounts for 2,500 tonnes. The operations may be running well below nameplate capacity, however — some traders said at 60 percent.
BUT AVAILABILITY WILL IMPROVE
Looking ahead, there will be a gradual improvement in cobalt production with the DRC, although dogged by political problems, likely to be at the forefront of this growth. Katanga started up its Luilu plant in late December 2007 with commercial production of copper starting this month — cobalt is a by-product and output for 2008 should reach 2,100 tonnes.
Other pending projects include Freeport McMoRan’s Tenke Fungurume mine, Nikanor’s KOV brownfield mine, Chambishi Metals’ new Mulyashi facility, CVRD’s Goro mine in New Caledonia and Sherrit’s Ambatovy mine in Madagascar.
Cobalt’s price spike to its all-time highs took place in mid-1978, when insurgents disrupted mining activity in the mineral-rich Shaba province of Zaire — now the DRC.
The country then was a major producer, along with Zambia, of copper and consequently by-product cobalt, so supply uncertainty had an explosive impact on the market — producer prices at the start of that year were just $6.85.
Although the market is now within sight of the record, in real-terms upside potential is much higher as $50 a pound is the equivalent of $123 now.
MinorMetals.com
Chart by Y2kdon
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