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March 5, 2014

Cobalt Market Undergoing Structural Change

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Cobalt Market Undergoing Structural Change


LONDON (Metal-Pages) 04-Mar-14. Cobalt intermediate products will have a much stronger bearing on the market price in future as intermediates increase their presence, SFP Metals Manager Nick French told delegates at Metal-Pages’ NiCoMo 2014’ conference in London.

French with close to forty years experience in the cobalt sector, said the market previously dominated by changes in metal prices finds itself in a period of structural change, in an interview with Metal-Pages Managing Director Nigel Tunna.

Since the global economic downturn of 2008, the cobalt market has had to accommodate the arrival of new production from Ambatovy in Madagascar, while Sumitomo is doubling production, all of which has been absorbed into the price.

Though problems have surfaced in recent days linked to the political situation in Ukraine, French says he sees optimism creeping into the cobalt markets led by demand from the battery and aerospace alloys sectors.
As part of this transition French also sees an ‘inevitable’ swing toward the London Metals Exchange LME becoming the dominant pricing mechanism for cobalt.

While China consumes 50% of the world’s cobalt, Africa particularly the DRC produces just under 50% of global cobalt units, meaning the Africa-China axis leaves the rest of the world hanging on the edge, said French, whose trading company is based in London.

African issues such as political instability, logistics, finance, power problems, mining licenses are elements that will help to underpin the market’s unpredictability, he said.

After a period of consolidation that saw the industry landscape in Africa shift, led by Chinese finance as Chinese companies bought up and refined resources in China, three suppliers ENRC, Glencore and Freeport have emerged as strong players increasingly replacing producers who previously wanted cash for cobalt raw materials at the mine gate, changing the terms of trade, French said.

When asked whether the current lack of volatility in the cobalt likely to be a recurring feature in future French said the metals status as a by-product will always leave it vulnerable to the behaviour of the copper and nickel markets.

“2014 being a transition year will be a good year for buyers locking in what they need for 2015/16,” French said.

- By John Evans in London (john@metal-pages.com)

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