Cobalt prices end nearly seven-month rally
Cobalt prices fell on Wednesday May 2 for the first time since October, with the potential bullish impact of legal action against Glencore by Dan Gertler insufficient to offset greater competition to secure spot sales in the immediate term.
Metal Bulletin assessed low-grade cobalt prices at $43.50-44.25 per lb in-warehouse on Wednesday, down 0.5% from $43.70-44.45 per lb previously.
High-grade cobalt prices moved similarly, assessed at $43.50-44.35 per lb in-warehouse at midweek, down 0.5% from $43.70-44.55 per lb on April 27.
Prices for both grades had stabilized since mid-April, following a steady run-up from the $30-per-lb level seen in October.
“We did wonder how long it was going to last; it’s been a pretty stellar run on the way up,” one trader source told Metal Bulletin.
But such high prices have limited traders’ capacity to take a position and finance material, giving way to cheaper offers in recent days in an effort to free up capital.
“We’re at the point where if you want liquidity you have to cut the price; no one has enough working capital to make it work,” a second trader said.
The situation has given rise to aggressive bids from consumers in the first sign for months that some sellers might be loosening the grip on their units.
“Consumers are attempting to get the upper hand,” a producer source said.
Furthermore, market participants have been eyeing price moves in China, where prices for metal and sulfate have weakened in recent weeks.
Consolidation of metal prices in Europe in the second half of April sparked panic selling on the China Stainless Steel Exchange in Wuxi, China’s southern Jiangsu province, in turn leading to more subdued prices in the Asian country’s domestic spot market.
“Seems like the oversupply of salts in China has spooked some of the more nervous longs,” a trader in Europe added.
While cheaper sales might be necessary to free up cash flow in the short term, the cobalt market’s strong fundamentals remain unchanged, sources said.
Gertler’s legal claims against Glencore also threaten to disrupt production at the company’s subsidiaries in the Democratic Republic of the Congo: Mutanda Mining and Kamoto Copper Co. Gertler is suing his former partner for $2.28 billion and $695 million in unpaid royalties from Mutanda and KCC respectively.
Market participants indicated that there has been no immediate impact on availability of units or prices, with the market instead waiting for further clarity after Glencore reportedly received a temporary injunction against Gertler.
“If anything, it’s going to solidify things rather than give any positive momentum right now,” the second trader said.
The next hearing is expected to be held in London on May 11.
But the news adds to the strong fundamentals - namely a tightness in supply of broken cathode, strong end-user demand and uncertainty over future supplies - which are expected to keep cobalt prices underpinned going forward.
“If anything, the fundamentals have improved over the past month,” another trader said.