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Cobalt breaks above $10.00/lb, hits 22-month high
Reuters, 05.09.03, 8:28 AM ET
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Metals - non-ferrous Miscellaneous Materials
Multi-Industry Gold Mines
By Martin Hayes
LONDON, May 9 (Reuters) - Cobalt prices broke higher on Friday, hurdling the $10.00 a lb level to hit levels not seen since July 2001, ratcheted upwards by growing tightness in supply and demand, traders said.
"Last month the market was static. But now it is starting to move up -- demand is very good and cobalt below $10.00 is cheap," one said.
The impetus for the price move came from a flurry of European business transacted on Australian producers WMC <WMR.AX> Resources Ltd's website this week. The firm sold up to 30 tonnes of high grade metal <COB-CATH-LON> at prices between $9.40 to $9.90 a lb. It also raised its offer from $9.10 to $10.40.
During April, by contrast, WMC <WMR.AX> business was compacted between $9.00 and $9.10.
Cobalt has been gaining since an October 2002 low-point of $6.10 -- a level last seen in April 1987 -- as production restraint has started to address a supply/demand imbalance. This has taken place against a background of low inventory levels.
"Stocks have all but evaporated...this market could be in serious deficit in 2004/2005, and when you consider that there is no new production likely until 2007 we could be looking at prices of $18.00/$25.00 next year," another trader said.
SUPPLY/DEMAND PICTURE CHANGING
Apart from 1997, when there was a supply deficit, the cobalt market is generally in balance. Total availability, which comprises production and stockpile sales, is now at record levels in excess of 40,000 tonnes a year.
The economic downturn of the last two years hurt demand from cobalt's main end-uses -- super-alloys and batteries -- but better prospects are on the horizon now.
"In aerospace, we are going to see a big build-up in the military sector -- such as large U.S. re-fuelling planes and the Eurofighter," the second trader said.
Cobalt is alloyed with other metals and used in jet engines, where alloys with high melting points are essential.
"In 2004, there is going to be significant demand for metals like cobalt, nickel, tantalum and rhenium," the trader said.
Other areas where offtake is likely to rise in the next few years are hybrid motor vehicles, which use nickel-cobalt batteries, and oil industry gas-to-liquids (GTL) catalysts.
Significant new supply prospects are thin on the ground -- Canadian miner Inco <N.TO> Ltd's Voisey's Bay and Goro projects are some years off coming on stream. Copper, copper and nickel concentrates from Voisey's Bay on the Northern Atlantic coast will not be available until 2006. Development of the Goro mine in New Caledonia has been wracked by labour disputes.
Any demand upturn will have to be largely met by stock disposals -- such as from the United States Defense Logistics Agency, part of the Defense National Stockpile Center, although traders said if the agency carries on selling at its annual fiscal rate it will run out of metal by 2005.
"In the late 1970s there was not enough cobalt to go around, and metal had to be rationed -- that could well happen again," one trader said.
Copyright 2003, Reuters News Service |
