China's '09 cobalt demand to rise 3-4 pct - refiner

Wed Mar 25, 2009

By Polly Yam

HONG KONG, March 25 (Reuters) - China's consumption of cobalt is expected to rise at
least 3-4 percent this year because of strong demand from cellphone batteries, even
though demand from other sectors may fall in the face of the global economic
slowdown, an official at a refiner said on Wednesday.


But output may fall this year as low prices are discouraging producers from running
full rates, which could cut exports from China, the world's top producer and
consumer of cobalt.

China consumed 5.3 percent more cobalt at 13,519 tonnes last year, nearly a quarter
of world demand, said Yang Zhai, marketing manager at Zhejiang Huayou Cobalt Co Ltd.

"Consumption should rise by more than 3-4 percent as demand from cellphones
increases, particularly with the development of the 3G," Zhai told Reuters at the
sidelines of a minor metals conference in Hong Kong.


Production of lithium cobalt oxide, which is used in batteries for cellphones, would
rise by more than 5 percent this year from 5,478 tonnes last year, he predicted.
That demand had taken up nearly half of China's cobalt consumption.

To develop China's new third generation (3G) mobile networks, the government has
estimated that the country's three telecom carriers would spend $58.5 billion over
the next three years. [ID:nPEK22716]

With the expansion in 3G networks, ZTE Corp (0763.HK: Quote)(000063.SZ: Quote), the
world's sixth largest cellphone maker, aims to raise revenue by a double-digit
percentage this year. [ID:nHKG280880]


Zhai said cobalt demand from the production of a catalyst, which was used in an oil
product called purified terephthalic acid (PTA), would rise as oil prices stablised.


Demand from the sector, which accounted for 6 percent of the country's total
consumption of cobalt, fell 29 percent to 950 tonnes last year due to sharp falls in
oil prices.

FALLING OUTPUT

But production of cobalt may fall this year from 20,000 tonnes last year, a third of
the world's output, as producers have slowed or shut production on weak prices of
the metal, Zhai said.

He estimated about 6,000 tonnes of cobalt stocks had been carried to this year.


Spot refined cobalt with purity more than 99.6 percent traded at about 305,000 yuan
per tonne in Shanghai on Wednesday, down 63 percent from a year earlier but up 9
percent this year.

Spot cobalt cathode COB-CATH-LON in London is trading around $16 per pound, down
from more than $46 in the first half of last year.

China would continue to rely on imported material as feed for the production of
refined cathode as local mines produced about only 1,000 of metal this year, he
said.

But the firm would increase refined cobalt production to up to 3,600 tonnes this
year from 2,800 tonnes last year after it boosted capacity by two-thirds to 5,000
tonnes a year, Zhai said.


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