Cobalt prices continue to appreciate on tight supplies, steady demand

Tight supplies and trader buying continued to push spot cobalt prices higher in the week ended Friday January 26, but currency moves deterred large spot purchases of cobalt in the second half of last week.

Metal Bulletin assessed low-grade cobalt prices at $36.95-38.25 per lb, in-warehouse, on Friday, up from $36.90-37.80 per lb at the midweek assessment, and $36.75-37.40 per lb on January 19. 

High-grade cobalt prices rose to $37.20-38.40 per lb, in-warehouse on Friday, up from $37-38.05 per lb a week earlier.

After a quiet start to the week, demand and activity picked up on Tuesday, spurred by trader restocking and pre-Chinese New Year buying, market participants told Metal Bulletin.

“It’s been a bit manic – something’s lit the fire,” a trader said.

Particular tightness for low-grade briquettes and broken cathodes prompted prices for the two grades to converge, and buyers increasingly struggled to find spot units available below $37 per lb.

A lag in new supply coming on stream after demand improvements downstream, and large purchases by Cobalt 27 late last year, have further contributed to the fundamental tightness, sources added.

“The whole thing’s tightening up. There’s less supply now than two to three years ago, when demand was only up 5-10% per year,” a second trader said.

“Material has been taken out by Cobalt 27 and it doesn’t look like it’s coming back any time soon,” a third trader said.

Meanwhile, the strength of the euro against the dollar over the past two weeks prompted a trend for small purchases, often 5 tonnes or less, in the second half of the week.

“People are producing in euros but selling in dollars – they haven’t worked out whether [the weaker dollar is] good or bad for them yet. It doesn’t change the supply situation, but it is putting people off the bigger purchases for now,” a fourth trader said.

“We’re seeing a lot of hand-to-mouth purchasing,” another producer added.

Yet consistent demand from traders and consumers kept the number of inquiries steady to firmer last week, even if volumes were slim.

“The volumes are small but it shows that when people have to buy they have to pay,” the fourth trader said.

Consistent demand has meant that market participants are confident that cobalt prices will remain underpinned.

“For all the noise and saying prices can’t go higher, it wasn’t happening at $18 [per lb], and demand hasn’t been destroyed at these levels either,” a fifth trader said.

“For investors, it looks like sub-$40 per lb is still a good bet,” the first trader said.