MethodologyContact usSupportLogin
Key takeaways:
The US government’s Defense Logistics Agency (DLA), a sub-tier of the Department of Defense, has canceled its contract opportunity to purchase up to 7,500 tonnes of alloy-grade cobalt over a five-year period. It announced this on Wednesday October 15.
First announced in August, the DLA intended to award a contract minimum of $2 million (guaranteed). It involved a contract maximum of as much as $500 million of cobalt cut cathode or rounds. This amount could be worth 7,500 tonnes of cobalt metal, according to Fastmarkets estimates.
The DLA has canceled the contract opportunity, it said, due to “outstanding issues with the Statement of Work that need resolution before offers may be solicited.”
The statement of work is a document that outlines the scope, timeline and costs of procurement.
“Upon resolution, solicitation will be re-issued with a new opening and closing date,” the DLA said.
“I guess this will be an ongoing story now. When will they come back, will they, won’t they?” one trader said.
“This was very unexpected and very strange to do so now. I guess how far prices have increased has made them rethink maybe, but who knows?” a second trader said.
“They will come back at some point, maybe in six to nine months’ time. They could have bought before the rally” a third trader told Fastmarkets.
Fastmarkets’ daily price assessment for cobalt alloy grade, in-whs Rotterdam was $21.00-22.50 per lb on Tuesday October 14. This is up from $12.50-14.00 per lb on February 20. That was just before the Democratic Republic of the Congo (DRC) announced its supply-squeezing export ban.
“Trying to buy 7,500 tonnes of alloy-grade cobalt at a fixed price in the middle of a rally seems to have proved to be difficult,” a fourth trader said.
The DLA first announced the auction on August 19. The buyer extended the deadline six times. There was one amendment to the specification to reflect brands (Vale Long Harbour) that are not qualified for usage in aerospace rotating parts.
The US has historically stockpiled materials considered critical to national security via the DLA. The agency held an estimated 302 tonnes of cobalt in its stockpile in 2022. This was when figures were last updated, according to the US Geological Survey.
The government shutdown in the US is adding extra pressure on the purchasing process, Fastmarkets understands.