July 2, 2012

 

 

Following an astonishment of several market participants, liquidation by traders and a scarcity of buyers dealt further blows to the spot cobalt market on Friday (June 22).

 

Low-grade cobalt was trading at US$12.80-14 per pound, down from US$13.10-14.20 on Wednesday (June 20). The high-grade quote inched down to US$13.40-14.55 per pound from US$13.50-14.80. The move lower was supported on the low-grade by consumer business at below US$13 per pound. The trade reported the lowest priced sales last week, with 10 tonnes of low-grade material sold to a consumer at US$12.80 per pound.

 

A two-tonne sale was, meanwhile, concluded at US$12.90, while the upper end of the low-grade range was sustained by another two-tonne sale at US$13.60. A small high grade trade was concluded as low as US$13, but with trades confirmed as high as US$14.55, the quote fell only slightly. Traders attributed the lower prices to seasonal developments and reasonable supplies of material.

 

"We had no interest yesterday. We're in the summer doldrums," said one trader. "We're competing with the big boys too, so we have to be very competitive," he added.

 

"We're in full blown free fall," said a second market participant, who had lost business after offering at US$13.15. "I decreased my prices and still couldn't book," he noted.

 

The European source suggested that market participants are attempting to liquidate stock ahead of further price falls.

 

"I've started to see traders coming in offering to sell. I'm sure they are selling below where they bought. I think they're liquidating," he added. "Some are saying they're getting unsolicited offers at US$12.80. I'm not surprised by US$13, but I am surprised by US$12.80," said a second trader.

 

But producers were scathing about the lower numbers, pointing to strong demand, particularly on the long-term.

 

"I think, honestly, these prices are way too low. At this price, end users take the max. It's good for them, but I hear most producers are tight," said one producer. "But demand is still so strong," he continued.

 

A UK trader, who has recently sold at the lower end of the range, confirmed this, noting, "After the CDI [Cobalt Development Institute Conference, which took place in May of this year], we got a sense of what was happening and we reacted quickly."

 

A second producer was shocked by the lower prices, arguing that long-term demand, especially for cobalt concentrates, has been very strong.

 

"I just don't see it. We're getting several enquiries from buyers saying they can't find concentrates," he said.

 

London Metal Exchange three-month cobalt was trading at US$27,100/28,200 (US$12.30/12.80 per pound) on Monday (June 25).