US$50/LB PREDICTED
Cobalt was perhaps overshadowed by gold and uranium and other base metals during 2007, but the metal’s price is accelerating on tight supplies and a predicted big shortfall as demand grows fast.
Author: Rodrick Mukumbira
Posted: Thursday , 03 Jan
2008
WINDHOEK -
It is not as luxurious as gold or as hot as uranium, but cobalt
left its mark in 2007, as the former and the latter overshadowed its
profile.
Speculative buying and consumer demand in the face of
supply constraints in the Democratic Republic of Congo (DRC) and the
depletion of US government's and former Soviet Union's stockpiles saw
the price for the metal surging over 60% in 2007, the highest since a
modern market for cobalt trading was established in 1978.
The
cobalt market is currently tight, with producer stocks either said to
be sold out or running low, resulting in BHP Billiton and Russia's
Norilsk Nickel repeatedly increasing offer prices at every sale.
At
the beginning of 2007, the average offer spread cobalt price stood at
about US$25 per pound, an increase of about US$12 per pound from the
beginning of 2006. The price soared to US$40.25 at the end of the
year due to surging demand for batteries for mobile phones and hybrid
cars as well as supply constraints following a moratorium on the
export of raw concentrates from the DRC in October.
Since the
early 90s, cobalt prices had been held down by sales of the US
government's stockpiles, and low grade cobalt material from the
former Soviet Union, which have largely depleted, according to a Gold
Editor Stock Info report.
China increased its consumption to a
fifth of global production last year - up from 3% a decade ago,
according to Resource Investor, and political concerns following a
return to conflict in mineral rich northeastern DRC has had investors
worried that production could be constricted.
The Financial
Times reported this week that shipments from the DRC, an important
supplier, have almost dried up since October when the central
government banned concentrates from leaving the
country.
Nevertheless, cobalt's public profile is set for
further heightening.
Cobalt is largely a copper and nickel
mining by-product, with annual production rarely exceeding 65,000
tons, and is now found in a growing range of rechargeable batteries,
super alloys such as turbine blades in jet engines, chemicals such as
dyes and pigments, wear resistant alloys, catalysts including
gas-to-liquid converters, and high performance magnets.
Independent
statistics say over the past four years, cobalt use in rechargeable
batteries has grown by nearly 300%, the fastest growing segment being
the metal's use in fuel-efficient hybrid cars, as the world looks for
ways of reducing air pollution and fuel consumption.
The
Financial Times report said a battery containing about 2.5 kilograms
of cobalt powers the Prius, Toyota's fuel-efficient hybrid car. It
quotes auto industry consultants JD Power forecasting that US
hybrid-car sales will increase from about 350,000 this year to just
over one million by 2012.
Sales of cell phones and laptops are
also surging boosting the fortunes of the metal.
This week
cobalt for January delivery hit a record-high price of US$45 per
pound, according to BHP Billiton's cobalt open sales website,
pointing to approximately 50% price increase since January last
year.
BHP Billiton, which controls over two percent of the
market, sold five tonnes of 99.80% cobalt on December 14 to Europe at
US$43, up US$3.75 from its December 7 sale and US$5.25 from its
November 29 sale.
Norilsk Nickel was offering the metal at
over US$43 per pound.
"The horse has broken out of the
stable and is breaking into a full speed stampede, so it's difficult
to know where it will end by the time its passions are fully spent,"
said a bullish trader quoted by Metal-Pages.
Banking group
Credit Suisse, which in September inaugurated a market in hi-tech
metal cobalt for investors seeking a stable commodity contract, is
also confident. Late last month it raised its average price target
for cobalt this year by 50% predicting a US$50 per pound price.
"The
cobalt market should remain tight, underpinned by tightening short
term supply and surging demand," Credit Suisse is quoted as
saying, adding "Cobalt prices could spike to $50 per pound in
the short term if supply continues to dry up while demand remains
strong.
"We believe consumption particularly from China
shows no signs of slowing and global demand for cobalt could grow as
much as 7% per annum from 2007 to 2009."
The banking
group also predicted a supply deficit of 1,680 tons next year.
Posted on: Wednesday, 7 November 2007, 09:00 CST
By Stewart Bailey
Katanga Mining [KATGF KATANGA MINING LTD WT KATGF or KATANGA MINING LIMITED KAT on TSE in CAD] has agreed to buy Nikanor for about $2 billion to create the world's largest cobalt producer.
Nikanor investors will receive $2.16 in cash and 0.613 Katanga share for each share they hold. The offer values Nikanor shares at $9.92, or 19 percent less than its closing price Monday in London. Investors controlling 78 percent of Nikanor and 48 percent of Katanga support the deal, the companies said Tuesday.
The merger creates a company that by 2011 will supply about half the world's cobalt, used in jet engines and rechargeable batteries. It is supported by the government in Kinshasa, which has been trying to attract investment since a civil war that ended in 2003.
The deal "does provide more power to the group, which has significant production going forward," said Calum Baker, a research manager at CRU, a metals consultancy based in London. "The merged entity would have more bargaining power to negotiate on mining licenses with the Congo authorities."
Cobalt prices have more than doubled in the past two years, fueled by concerns that supplies from Congo would not materialize. Demand has accelerated as China's share of consumption increased to a fifth of global production last year, from 3 percent in 1997, according to Roskill Information Services.
Originally published by Bloomberg News.
(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.
Source: International Herald Tribune