Cobalt poised for gains as six-week rally in FeMo, moly oxide ends
Cobalt poised for gains in September after steady summer rise Cobalt prices are poised to see modest gains in September on increased buying from battery producers and tightness in high-grade metal Six-week rally in FeMo, moly oxide ends The six-week rally in molybdic oxide and ferro-molybdenum prices came to an abrupt end late last week after European consumers did not return to the market as many traders had hoped.
Cobalt poised for further gains in September after steady summer rise
Cobalt prices are poised to see modest gains in September on increased buying from battery producers and tightness in high-grade metal.
The majority of market participants polled expect cobalt to rise by between $1 and $2 per lb by the end of September following steady gains through the European summer.
Prices have been firming steadily through the summer on better demand and more bullish sentiment.
Low-grade cobalt was trading at $12.60-13.30 per lb at the start of June, while high-grade metal was changing hands for $13.50-14.50 per lb.
An increase in consumer enquiries this week has given traders and producers hope for a more active September.
“I have seen a lot more enquiries this week,” said one trader on Wednesday who has received interest for over 150 tonnes since Monday.
“I think it will go up steadily rather than rapidly. By the end of September we’ll be slightly higher, perhaps up by a dollar,” he said.
The bulk of the fresh enquiry has come from Asian battery producers, other sources agreed.
“We’re seeing a lot of prices within range – the Japanese seem to be coming back,” said a producer.
The end of BHP Billiton’s nickel-cobalt toll refining deal with Xstrata at the Nikkelverk refinery in Norway, which is due to come to an end this year, will lend support to the high-grade market, sources said.
The end of the deal would represent BHP’s withdrawal from the market following the sale of its Yabulu refinery to Clive Palmer earlier this year.
Once the deal ends, it could take some 800 tonnes of high-grade metal out of the market and into the hands of either Glencore or of a long-term offtake partner, sources said. Glencore already markets other Falconbridge material for Xstrata.
“It would mean that the world has one less free-market cobalt supplier, and, all other things being equal, it should tighten the market up,” said a second trader.
“It’s all eyes on high-grade. The downside is limited and now it’s down to consumers bringing in some meaningful enquiry,” a third trader said.
High-grade has also taken support from the force majeure at Vale Inco’s nickel-cobalt operations in Canada.
Vale Inco declared force majeure on its cobalt deliveries to US customers in the first week of August due to the strike at its Sudbury and Voisey’s Bay operations.
Despite the bullish forecasts from much of the trade, consumers remain cautious, they told MB.
High Chinese cobalt ore and concentrate imports earlier this year when cobalt was trading as low as $9.90 per lb could still be resold to the market, one buyer said.
Cobalt concentrates cif main Chinese port are trading at $12.80-13.30 per lb compared with $11.50-12 per lb at the start of June.
“We’re seeing the Chinese offering more and more aggressively, they’re trying to get rid of the massive positions they built up months ago,” he said.
Six-week rally in FeMo, moly oxide ends
The six-week rally in molybdic oxide and ferro-molybdenum prices came to an abrupt end late last week after European consumers did not return to the market as many traders had hoped.
While those hopes have been dashed this week, market participants still expect stainless mills to buy again in September though.
Drummed molybdic oxide dipped to $17.20-18 per lb on Wednesday from $17.80-18.30 last Friday, though few deals were reported to MB. Prices dropped for the first time in six weeks last Friday.
Ferro-molybdenum prices have rallied by more than 60% and molybdic oxide prices by nearly 80% since the start of June due to Chinese buying and speculative position-taking by traders ahead of an anticipated recovery in European consumer demand.
But enquiries have dried up and prices have fallen back in the past ten days.
“We’ve not done anything this week – it’s by far the quietest week we’ve had in months,” said a trader.
“There is no end user demand in Europe at all at the moment,” said a second trader, who told MB that offers were still coming from parts of Asia in the lower half of the new range.
Market participants expect activity and prices to pick up in the next week and into the fourth quarter as consumers return, though some are sceptical there will be enough demand to immediately push prices back above $18 per lb.
“We may see a rebound in the next week or ten days, but I’m not sure yet,” said a producer. “I expect activity to pick up, but it might not be strong enough to raise prices.”
For prices to rise again, Western consumers will need to buy in earnest. Traders have told MB this month that some Chinese buyers are shipping material back to Europe to take advantage of recent price increases (MB Aug 10).
“There are a few containers being offered from China – material that was bought in May or June,” said the second trader.
Ferro-molybdenum basis 65-70% dropped to $39-40 per kg on Wednesday from $40-42 previously, with many traders holding on to what material they have in the hope that the drop in prices will only be temporary.
“In the last two days, I’ve sold just two tonnes at $39 [per kg],” said the second trader. “But I’m not a fan of giving away material at lower prices, and will only start offering again when prices go back above $40 [per kg].”