MINORS FOCUS - Cobalt upward momentum continues, price hits 10-mth highs

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Martin Hayesmartin.hayes@fastmarkets.com+44 (0) 20 7337 2148

London 27/07/2016 - Cobalt prices continued to make upside headway in Europe on Wednesday, sustaining the recent trend to hit levels last seen in August 2015.

A combination of less availability developing for the second half and reasonable demand during the slower summer period has kept the bias to the upside, traders said, and the healthy nature of fundamentals suggests that there is more upside movement to come.

"We are asking for and getting higher numbers... and the producers are really, really tight [of metal]," a trader said.

On the free market, cobalt 99.30 percent was quoted at $11.50/12.25 per pound, up around $0.50 since last week, while 99.80 percent metal was at $11.80/12.50 per pound.

"[The move] has accelerated over the last few days and there has been some spot demand out of China," another trader said.

The market has staged a steady, albeit unspectacular, upmove for most of the year, having reached a bear-market nadir in December 2015. Prices then hit seven-year lows of $9.50/10.25 per pound.

Producer availability has become constricted as the year has progressed, with most major suppliers having less material to offer than expected. They have therefore been downgrading output guidance.

"Supply has contracted in 2016 with the announced suspension of production from Votorantim in Brazil. Indications are that the metal market is approaching balance or slight deficit," producer Sherritt International said in its interim results statement on Tuesday.

"Overall demand is supported by the longer-term outlook for cobalt in rechargeable batteries, a market that will utilize either metal or chemical forms of cobalt, with purity being an important factor in the decision-making. Superalloy demand also remains strong," it said.

For 2015, the Cobalt Development Institute (CDI) put total refined metal supply at 98,113 tonnes, which was up seven percent on the previous year, while demand was seen at around 89,000 tonnes, up eight percent from 2014.

LME prices, meanwhile, are also at their highest this year, although trading interest is sporadic. The cash official price was $25,400/25,500 per tonne on Wednesday, up around $2,000 since the start of the year.

Traders said LME prices are usually just marked up to reflect the free market because business is irregular. Cobalt open interest is 387 one-tonne lots, of which 241 are for the January 2017 prompt date.

Warehouse inventories stand at 644 tonnes, having dropped back slightly from January's level of 681 tonnes, which was the highest ever for the contract launched in February 2010.

The lifetime price peak for the LME cobalt contract was set in April 2010 at $47,300.


(Editing by Mark Shaw)

 

 

 



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