Cobalt Creeps Into 2007Publisher: Metal Pages...

Cobalt Creeps Into 2007

Publisher: Metal Pages (www.metal-pages.com)


LONDON (Metal-Pages) 11-Jan-07. Cobalt consumers are playing a canny game and many are still sitting on the fence 11 days into the New Year. Although opinions are divided over just how active the current market is, lack of buying on the BHP-Billiton and Norilsk Nickel sites, coupled with reports of low spot activity, are creating an uneasy calm.

"You may say it is quiet," said one bullish trader, "But that's just the screens. I've seen 300 tonnes of business land on my desk - from Austria and the UK to the US and Taiwan. All my customers' sectors are seeing growth of around 15% pa - they're all maxing their contracts. The furnaces are glowing. At the moment the market is between $20-30/lb - but I expect it to burst out of this range when OMG signs its offtake agreement with Norilsk."

The trader said demand could reach anything between 65,000-70,000 tonnes this year, leading to a 8,000 tonne shortfall. "Customers are sitting on one day inventories - they're living on vapour," he added.

Others agreed that customers are still playing a waiting game, hoping the price will fall further before coming into the stock market.

Said one major cobalt processor: "Some of the consumers have been very clever - buying when the price was low in November and still living off those stocks. Others are living hand-to-mouth, hoping the price will dip a little more. It has been quiet in the spot market. However, the fundamentals remain the same - strong."

The source said his company had negotiated around two thirds of its 2007 requirements on long-term formula based contracts. The outstanding amount is made up of quarterly purchases and spot. "If we have a very good period, then we will come into the spot market to buy," said the source. "But if we buy at $20, we'll sell our product based on that price."

At the moment $20 is a little below the current range, with Norilsk offering out at $22 and BHP-Billiton at $25.50, despite little to no business being transacted recently.