Cobalt prices rose closer to $40 per lb on Friday March 2 when suppliers raised their offers again, confident that buyers will soon have to book at higher levels on bullish expectations for electric vehicle batteries and good demand from the super-alloys sector.
Metal Bulletin’s benchmark low-grade cobalt price climbed to $38.80-39.85 per lb from $38.75-39.70 per lb on Wednesday February 28, while the price of high-grade metal remained at $39-39.90 per lb.
Relatively thin volumes traded in the spot market, with one key transaction for more than 10 tonnes of low-grade material sold at $39.85 per lb when adjusted to an in-warehouse basis. Another transaction for high-grade material was concluded at $39.50 per lb.
Rising prices are preventing buyers from finalizing purchases both on a spot and a forward basis, a source at one large trading firm said.
“We’ve got enquiries for 2019 and 2020 for hundreds of tonnes each as well as spot inquiries. Buyers are not making decisions quickly and given how the market is moving we are requoting [new offer prices for spot and forward business] every day,” the source said.
Buyers who finalized their budgets to buy cobalt in 2018 during the second half of 2017 that allowed around $30 per lb in their forecasts must now return to their management to get approval to buy at much higher prices.
“Here we are near $40 and it takes time for them to get sign-off. It’s unfortunate for those buyers who need the material but $40 is an inevitability at this point and obviously as spot prices rise we’re also adjusting our forward offers,” the trader said.
All parts of the supply chain, from producers through traders and distributors to consumers, are focusing in the short term on when and why the market will reach $40 per lb – and weighing the degree to which higher prices will affect demand over the long term.
“The tightness of briquettes and broken cathode is really supporting this market. While we would still sell cut cathode in the mid-to-high-$39s, the lack of availability of broken cathode means we are quoting it at $40.50 per lb,” one trader said, adding that in his view none of that traditional low-grade material is available below $40 per lb.
On a longer-term basis, producers and consumers are considering the implications of high and rising prices for demand.
“I can feel that most of the players are aiming at $40 per lb and beyond,” a source at one large company said. “But clearly since the market exploded battery-makers are complaining about the high prices.”
For now producers have not taken much account of this but, since prices continue to rise, they are likely to give deeper consideration to the destruction of demand that might result, he said.
“I can’t see it will continue to rise like this once it gets beyond $40 per lb,” he added.
And he disputed the suggestion that large suppliers would not have much desire or even capacity to restrain a steadily climbing market.
“They will make a strategic decision to prevent substitution and replacement. Based on previous discussions, I think that once $40 per lb has been reached they are likely to become less aggressive,” he said.
A source at a large supplier acknowledged that concern among customers that the price is too high today and which might result in replacement in the future.
“But it’s a difficult one to play. The whole element supporting this is, first, shortage of Chambishi [broken cathode] and Ambatovy [briquettes] and, second, the fact that right now there is nothing to pull the market down.”