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June 11, 2015

Why Banks, Trading Houses and Funds Have Set Their Sights on Cobalt

At a time when metals are failing to attract considerable outsider attention, investor interest in cobalt is showing early signs of a pick-up.
Banks, trading houses and hedge funds are among the entities showing a fresh interest in cobalt, even as the blue metal struggles to stage a meaningful price recovery.
Here, Metal Bulletin explores what’s behind the growing interest in the minor metal and considers whether it’s justified.
Among the fresh interest is that from investors, looking to secure material in the hope that prices will rise in the long-term. One US fund was understood to be seeking around 100 tonnes of metal at the recent Cobalt Development Institute (CDI) Conference in Toronto.
And seasoned minor metal traders, like Wogen, who had been largely absent from the cobalt market in recent years, are also believed to be once again eyeing up the blue metal.
Banks, including BTG Pactual, which contrary to the trend among many banks, has been aggressively expanding in commodities, are throwing their hats into the ring too. The Brazilian bank has hired two big name cobalt veterans: ENRC’s Tony Southgate and ex-Glencore trader Isaac Levy, and is already understood to be offering large volumes of metal on the spot market.
The heightened interest comes despite prices lingering in the low-$13s per lb, and showing little signs of any significant rally since dropping from the low $20s in 2010.
So just what is driving the sudden interest from both traditional and non-traditional sources?
The Tesla factor…
According to research by Macquarie, Tesla alone may require up to 10,000 tpy of cobalt, which accounts for around 10% of the current global market. Others peg the figure at closer to 7,000 tonnes. On top of this demand from Tesla, heightened demand from the rest of the battery sector, largely due to raised environmental standards, as well as from the aerospace sector, has left many bullish about cobalt’s future.
…One trader who attended the CDI conference last month said, “I think a few companies are looking at cobalt more closely. There’s a relatively new application in the form of huge growth in batteries. Tesla, smartphones, Panasonic, for instance. A lot of analysts can see it looks like a market that’s set to tighten, which was clear from the presentations at the CDI”…
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