Cobalt and moly markets wonder how far prices may fall

Cobalt suppliers and buyers are trying to work out where prices may slide to after the dramatic declines of recent weeks

Cobalt edges down in faltering economy

Cobalt suppliers and buyers are trying to work out where prices may slide to after the dramatic declines of recent weeks.

Prices continued to edge down on Wednesday, with high-grade falling to $16-17 per lb from $16-17.25, and low-grade moving to $14.50-15.60 per lb from $14.50-15.75, traders said.

Prices have fallen by around $3 per lb after trading at $17.50-18.50 for around five weeks in August and September, pulled down by limited consumer demand, and given a push too by traders happy to sell at lower levels as they price in purchases.

“Frankly speaking the situation is making us quite nervous,” one producer source said.

But prices cannot fall much further, one trader in London said. “We’re already seeing strong buying interest so I think that trading companies will ultimately be unsuccessful in driving it down much below $14 per lb, particularly with other precious and base metals sharply higher,” he said.

An experienced trading source brushed aside suggestions that the market was being driven artificially, and predicted that prices will trade between $12 and $14 per lb in the weeks ahead.

“Below that [$12] there will be a rebound,” he said.

The cobalt price has more nearly reflected the reality of the global economy this year than the price of some more widely-traded commodities, he said.

“Cobalt miraculously has been following the economy. There was a dead-cat bounce at the start of the year on China, now there is a pressure as stocks begin to grow and consumption is deteriorating,” he said, noting sales of low-grade at $14.50.

Consumers in the super-alloys sector, for example, are predicting that demand in the fourth quarter of 2009 and first quarter of 2010 will be down around 15% on the stronger months of this year, he said.

But others said they believed the rate at which prices are falling has declined.

“It’s levelled off,” said one significant trader source, noting a sale of low-grade material at $15 per lb.

Moly prices rely on consumers and China

Moly prices will continue to fall if China does not return to the market as a net buyer after the National Day holiday, and western consumers do not return to the spot market in the near future, market sources said.

Drummed molybdic oxide remained at $13.20-13.80 per lb on October 7, but has drifted down from its 2009 peak of $18.30-18.70 per lb since mid-August.

Much of the fall has been attributed to the lack of demand from China, culminating in the national holiday this week. Moly oxide prices will recover if China starts buying again, market participants said.

“China has been the major player in this market for two years,” a trader said. “They were light buyers in the ten days before the holiday, so I won’t be surprised if they appear as net buyers when they return.

The ferro-molybdenum price has been following a similar pattern, falling to $31.60-32.50 per kg from its peak of $42.75-44.10 per kg in mid-August.

A lack of western consumer demand on the spot market has been blamed for the fall, with consumers covering their needs through contract business.

Should capacity utilisation among western steelmakers increase in the fourth quarter, they will be forced onto the spot market and prices will improve, market participants said.