Market Briefing - September 4, 2009

As with its sister metal, nickel, cobalt prices stabilised in the second half of August with 99.7% material at $19.50/lb and 99.3% material at $18.0/lb, after having been on an upward trajectory since the start of the current quarter. Nevertheless, prices, which have been directed by those in the non-ferrous sector particularly in the recent past, are at their highest level for the first time since November last year. From a fundamental standpoint, however, the market has received support from improved demand in Asia, and recently a tightening of the supply side of the market. We believe these factors (see below for more details) will steer cobalt prices higher going forward. The August monthly averages were both up on July by 7.3% and 5.6%, respectively.

Is the supply side tightening?
Although cobalt production growth has been curbed by the delay at a number of nickel-cobalt laterite operations, more recently, there have been a number of activities, which have potentially reduced availability in the spot market. In particular, BHP Billiton’s withdrawal from the cobalt spot market, following the end of its tolling agreement with Xstrata at the Nikkelverk refinery in Norway later this year and the sale of the Yabulu refinery means that there will be between 800 to 900 tpy of less cobalt for sale on the free market. Speculation is now rife in the market as to how BHP will deal with the cobalt from Kwinana, with only a few other operations able to take the feed. The Nikkelverk refinery has the capacity to process 86,000 tonnes per year of nickel and 5,200 tonnes per year of cobalt.

> This article gives the introduction to our latest detailed analysis on the market. To access a full version of a recent detailed monthly report on the base metals markets plus a recent briefing update, click on the links below.

> Base Metals Market Briefing - December 9, 2008.

> Base Metals Market Briefing Update - December 16, 2008.

Disclaimer: Whilst every effort has been made to ensure the accuracy of the information used in this document, GFMS Metals Consulting cannot guarantee such accuracy and GFMS Metals Consulting does not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this information.