Cobalt rally continues; moderated by scrap buying, early delivery requests

Cobalt prices made further gains last week, but the rally was kept in check by buyers able to satisfy some of their requirements by purchasing scrap and pulling forward contracted volumes.

Metal Bulletin’s benchmark price assessment for low-grade cobalt was $38.50-39.30 per lb, in-warehouse, on Friday February 23, up from $38.15-39.30 per lb midweek, and $38-39.30 a week earlier.

High-grade cobalt prices rose to $38.50-39.40 per lb on Friday. Prices had been stable on Wednesday at $38.20-39.40.

Price gains were more pronounced in the second half of the week after Chinese market participants returned from the Lunar New Year holidays.

“Some customers are intensely trying to secure cobalt,” a Chinese source told Metal Bulletin. “Cathode production slowed down a bit pre-Chinese New Year, but it’s looking like it will ramp up now.”

Cobalt prices have risen steadily since the beginning of the year, as a result of tight supplies and strong downstream demand from the aerospace and medical sectors, as well as electric vehicle production.

Low-grade cobalt prices are up 8% since the beginning of the year, according to Metal Bulletin data, while high-grade prices are up 6%.

“We cannot detach this run up from the electric vehicle story. There is less and less metal available and the underlying demand is incredibly robust,” a trader said.

“Fundamentally we’re streets ahead of 2008, when prices were $50 per lb,” a second trader said.

However, buyers are pursuing alternatives to purchasing in the spot market, on one hand because it is difficult to secure material, and on the other hand to avoid fueling and paying spot-market prices.

“We have to pick and choose who we offer to as we need to maintain stock for our long-term customers. It’s getting more difficult to replace stocks every day,” the second trader said.

“A lot of scrap is being used and contracted volumes are being pulled forward as a means to avoiding the rallying spot prices” the first trader said.

“Once scrap runs out, does that signal the next run up? You couldn’t get a thinner supply side, really, but it needs scrap to run out; $40 is a bit of a barrier at the moment,” the first trader added.

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