Cobalt, a metal in demand from electronics and automobile industries, was one of the top five commodities that gained last week. Its prices rose over seven per cent last week, while in the last 12 months, the metal has gained over 20 per cent.

Cobalt, a minor metal, was quoted at $14.35 an ounce or $31,636 a tonne on the London Metal Exchange on Monday for three-month futures as well as cash. It had touched a record $47,700 in April 2010 before dropping to $22,550 in November 2012.

Cobalt finds its uses in lithium-ion batteries, catalysts – particularly in automobiles, and as a hard and wear-resistant alloy in aircraft.

The metal exists only as a trace in the earth and is not mined directly. It is mainly derived from ores such as cobaltite, erythite, glaucodot and skutterudite. It is also derived as a by-product of nickel and copper mining.

While strong demand can be attributed for the metal gaining, an important reason for the current rise is the political tension in the Democratic Republic of Congo, which is torn by armed rebellion.

Geopolitical worries

Congo is the largest producer of cobalt with an annual production of around 60,000 tonnes in 2012. It accounted for 54.5 per cent of the global production. China accounted for 6.4 per cent and Canada 6.1 per cent.

Though cobalt supply is mainly from Congo, only a fraction of the metal has been refined in the African nation until last year, with most of the exports taking place in the form of concentrates.

In order to promote refining, Congo initially banned export of copper and concentrates in April. This was later deferred to the year-end with the Congolese government announcing a moratorium. With that period end, the metal has firmed up with traders, who hold stocks, tightening their hold on the metal inventories.

Besides, political unrest in any country concerns trade. It has happened in the case of Congo too, according to trade sources.

Tight supplies

Supplies are the main reason for cobalt’s current run in the face of rising demand, driven by signs of growing economy. The volume of trading is also showing signs of rising, fuelling the rally further.

Producers say that inventories are tight with them that they aren’t really ready to offer much. On the other hand, buyers, anticipating a rise in demand, are ready to pay a premium to stock up the material.

According to reports, most of the producers are getting offers to buy the metal at over $31,500 a tonne. A feature of last week’s rise in the metal was that the rally continued despite holidays in China in view of the Lunar New Year.

Consumers complain that they are getting few offers and that too the volume is small. Finding large quantity of supplies from producers is proving to be tough, resulting in buyers coming forward to pay higher.

However, there are reports that some traders are sitting on a pile of inventories. They are, however, not willing to release the stocks as such a move could hammer prices.

Cobalt prices are seen heading north in the near futures with some see it extending its bull run until the end of this month.

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