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| Cobalt prices push to three-month highs, end-user interest starts to bubble up |
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By Martin Hayes - |
| London, 30 October 2009 - Cobalt prices moved higher in Europe this week, maintaining a recent trend to hit their highs levels for some three months as end-user interest continued to emerge and sentiment improved. "The market is quite a bit stronger than a few weeks ago. There was a lot of bullish talk at a conference last week in the US," a trader said. Prices edged up to just below the levels of early August, when the high-grade price briefly popped above $20.00 per pound in a premature rally ahead of expected fourth-quarter buying. High-grade 99.8 percent metal was quoted at $19.00/20.00 per pound, up around $1.00 from last week, while 99.3 percent Russian metal stood at $18.00/19.00, up around $2, and just 25 cents below the nine-month peak set in the summer. "There is a shortage of prompt availability right now and the market is looking good for 2010. Super-alloy demand appears good," the trader said. Cobalt demand is fairly broad-based but around 55 percent emanates from the chemicals sector, which has started to show signs of life, while some 18 percent is used in super-alloys. Up to 2007, demand had risen for six years in a row, reaching annual record levels of just under 60,000 tonnes, but it tailed off in 2008 as the economic downturn bit. "In the first quarter we are going to go to $35 because there is a lot of pick-up in demand and very little supply," another trader said. "You've got three producers out of action: Vale Inco, Uganda and Chambishi in Zambia." The LME will introduce its cobalt futures contract in February and there are some signs of pre-launch positioning taking place. One producer - Vale - has already listed its cobalt for delivery and more are expected by the end of the year. "There will be a scramble for low grade (99.3 percent) as this is the minimum specification to put into warehouse and deliver," the second trader said. The discount between the grades is already narrowing - business for 99.3 percent cobalt has been seen in the $18.00 per pound level and even higher in an isolated trade. "I think it is a bit premature to talk about stockpiling now - we may see that before the end of the year," the first trader said. Signs that price volatility is emerging have resulted in consumers opting more towards fixed-price contracts rather than formula-based transactions, the second trader said. Even before debuting as a fully-fledged futures market, cobalt has built up a reputation as a fast-moving metal that can rival its major base metals peers, such as copper, for peak-to-trough volatility. Prices have displayed this over the past year amid high volatility. They reached five-year lows of $9 per pound for 99.3 material and $10 for 99.8 metal at the start of December last year, tumbling after hitting 30-year peaks and near-record highs of more than $50 per pound in May. (Editing by Mark Shaw) |
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