Cobalt prices have slipped

Cobalt prices are falling back to earth after reaching a cyclical peak in April of $32.57/lb that was almost double the $16.70 average of 2006, lifted off by strong demand from the aerospace, commercial aircraft and industrial gas turbines sectors. Now, U.S. market prices have slipped and are slightly above $28 this month. The U.S. Geological Survey says nearly one-half of the cobalt consumed in the U.S. is for use in superalloys, which are used mainly in aircraft gas turbine engines; 9% was for use in cemented carbides for cutting and wear-resistant applications; 18%, for various other metallic applications; and 24%, for a variety of chemical applications.

Traders had expected continued price increases this spring but that isn’t happening, with benchmark world prices in Rotterdam warehouses actually as low as $27.60 this week. What’s happening? Most 2007 supply contracts for cobalt and cobalt-bearing superalloys have been filled and superalloys producers have been unable or unwilling to offer fixed-price terms for next year’s deliveries because of uncertainty about future cobalt market pricing. So, spot transactions are thin.

Cobalt supply has been somewhat tight worldwide but there’s a chance that supply will expand. Reuters reports that the International Monetary Fund now sees expanded output in the Congo, as private investment boosts the mining sector in a mineral-rich nation that finally has stabilized after years of civil strife. And there are news reports of expanded production in Zambia, China and India, as well.