Buyers of cobalt metal in Europe are being approached by their customers for product, in anticipation that prices will continue to move up on news that China’s State Reserve Bureau (SRB) plans to build stocks, combined with producer tightness.

Low-grade cobalt prices moved up to the $15-per-lb level for the first time since April as a result, trading up $14.25-15 per lb on July 18, compared with $14-14.90 per lb on July 16.

On July 11 Metal Bulletin reported that China’s SRB would start making metal purchases, with some suggesting that the state-owned stockpile might buy as much as 1,000 tonnes.

“People think that SRB buying will take the market higher, and there are spot enquiries for product as a result, because customers want to buy before prices move up,” one buyer source said.

Having been covered on long-term contracts until the fresh enquiries came in, there is a possibility that consumers will have to enter the spot market as a result, he said.

“I would see the price in the mid-$14s based on the indications I have seen this week,” he added.

In fact, though, the SRB only bought 50 tonnes this week – at levels which one large supplier said equated to as little as $13.50 per lb, excluding VAT. 

“SRB? Stop! Ridiculous bullshit,” one trader said in an email.

“In the short term you’ve got to question the significance of the news, given the fact everybody is saying that the SRB news is driving the market – but the price that the SRB apparently settled at is lower than where everyone else is transacting. That isn’t really a bullish signal, is it?”

Others were less dismissive of the news, though, saying they believed the stockpiling agency would return to the market continually through the year.

“They seem to have been pretty open, saying they will hold a series of tenders through this year as they seek to understand how the cobalt market works and who the players are,” a source at one firm that trades large volumes in China said.

They said that the development of electric and hybrid electric vehicles (powered by batteries containing cobalt) is one of China’s strategic interests.

That factor, they suggested, may have put cobalt onto the SRB’s agenda, which, if anything, will ultimately tighten the market somewhat.

Suppliers also reported that their capacity to supply against spot enquiries was limited in the face of steady contract demand.

“As far as briquettes go, there is more demand than there is supply, particularly from the resurgent battery sector,” one source said.

Alex Harrison
Twitter: @alexharrison_mb