Small cobalt deficit seen in '08 on robust demand
Thu Apr 10, 2008 7:25am EDT
reuters.com
By Carole Vaporean
LAS VEGAS, April 10 (Reuters) - Healthy demand should push the global cobalt market into a 38-tonne deficit in 2008, but new supply due to come on stream in the next year and a half should send it back into surplus and weigh on the price, an industry expert said.
Speaking Wednesday at the annual Institute of Scrap Recycling Industries, or ISRI, convention in Las Vegas, Nevada, Derek Benham, president of BenMet NY, a metal commodity trading company, said the meager deficit would make the 59,000 tonne-per-year world cobalt market nearly balanced in 2008 after a surplus of 89 tonnes in 2007.
Benham, who sells cobalt into the U.S. market to superalloy manufacturers like General Electric (GE.N: Quote, Profile, Research) and Pratt & Whitney and to other users for Chinese producer Jinchuan, said the consumption outlook remains healthy well into the future.
Lengthy backlogs in the aerospace industry, rapid growth in the ceramics market, rising sales of hybrid vehicles requiring batteries, and increased nickel and lithium-ion battery use in mobile phones and computers should keep cobalt demand around 60,000 tonnes annually.
But on the production side, Benham said, a slew of new projects scheduled to come online in the Democratic Republic of Congo, with the world's most plentiful reserves, through 2012 will probably override the positive consumption outlook.
For example, Katanga Mining (KAT.TO: Quote, Profile, Research) is set to produce 8,000 tonnes per year at the end of 2008, rising to 40,000 tonnes by 2012, Freeport McMoRan's (FCX.N: Quote, Profile, Research) Tenke Fungurume project has plans to produce 8,000 tonnes a year from 2009, and Nikanor will increase output to 27,500 tonnes a year by 2011.
"Within three or four years, the DRC will regain its position of preeminence in the cobalt market after a decline over the past 20 to 30 years," said Benham.
Before 1978 the DRC, then called Zaire, was the dominant source of the world's cobalt. But rebel attacks eventually shut many of the mines and refineries in that country.
In the last few years DRC refined cobalt output came to only 900 tonnes. But by the middle of last year, the government banned export of all lower value forms of cobalt, driving the price up sharply.
Even if only half of the DRC's scheduled projects go ahead as planned, he added, strong consumption growth will be supported.
"We could expect surpluses and a declining price to be in evidence 12 to 18 months from now," he said.
Cobalt's price rallied along with other commodity metals to $50 a lb early this year from $30 a lb in 2007, up sharply from $12 to $15 per lb in 2006, its historic range.
The last time cobalt reached $50 a tonne was in 1978 and 1979 when rebel attacks threatened Zaire's production. (Editing by Jim Marshall) |
