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Shrinking Chinese stockpiles, lower shipments from Africa and the booming smartphone industry will help limit the downside for cobalt prices, according to ex-Umicore svp Dirk Uytdewilligen.

Uytdewilligen, who after 27 years of service left his position as senior vp of Umicore's Cobalt and Specialty Material division at the end of last year, has recently launched his own minor metals consultancy firm.

He told Metal Bulletin in an interview that high cobalt stock levels in China have typically been necessary due to the long DRC/China pipeline.

But low recent cobalt prices, combined with local power interruptions, have led to lower shipments from Africa.

"At today's cobalt price, export and mining/upgrading costs are hardly covered, making shipment from certain sources in the DRC unattractive," he said.

"Margins are too small for many companies to move it out," he added.

"If the price goes up to around $15 per lb, cobalt can probably get to market again, but at $10/11, a lot stays stockpiled or unmined in the DRC," he explained.

Cobalt prices were stable on Friday January 11 at $11.10-12.40 per lb on the low-grade, and $11.50-12.80 per lb on the high-grade.

Prices have rallied since the end of December, but have recovered only some of the ground lost during the preceding three months of almost continual falls.

Meanwhile, in China, stockpiles have fallen, he said.

Uytdewilligen's views were supported by a recent report by UK-based trading house Darton Commodities.

According to the annual report produced for Darton's customers, Chinese cobalt imports fell 20% to 32,484 tonnes of cobalt contained in 2012.

Chinese cobalt stocks fell in 2012 by just over 6,000 tonnes, according to Darton's calculations.

And while availability of cobalt has shrunk over the past year, demand has grown, especially in the battery field, for use in electronics such as smartphones, according to Uytdewilligen.

In 2013, Deloitte predicts that global shipments of smartphones should exceed one billion units for the first time. The number of all devices in use is likely to be close to two billion by year-end.

Typically and historically the nickel to cobalt cost ratio has been around 3:1, yet the current level is closer to 1.5:1.

Uytdewilligen believes that this, combined with very good future supply prospects, means that cobalt will become attractive to buyers or developers of new applications.

"The big end users -- major battery users -- can live with cobalt at $10-15 per lb versus $30-50 per lb in 2007/2008. If there's a choice of material, cobalt is now back in the race ."

Fleur Ritzema
fritzema@metalbulletin.com

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The Globe & Mail reported on January 11, 2012 that manufactures are sounding the alarm a scarcity of minerals and metals, including cobalt.

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Formation Metals has recently been covered by various newsletter and media in response to its share performance during these current volatile financial markets. The links below include:

1) Peter Grandich discusses the state of the markets with Michael Campbell on Saturday, Oct 29th on the Money Show and discusses Formation Metals around the 25 minute mark.

2) MicroCap.com has posted an in-depth report on Formation Metals by by Danny Deadlock.

3) Al Korelin of the Korelin Economics Report interviewed Rick Honsinger, Formation Metals' V.P. Corporate Communication, for his Oct 29, 2011 Weekend Show, starting in Segment 7.

4) Peter Grandich published a general response from Formation Metals' V.P. Corporate Communcations to shareholders, commenting on the currrent share price and status of the Cobalt Project.

Formation Metals Inc.
www.FormationMetals.com

IMPORTANT DISCLAIMER: Please note that any opinions, estimates or forecasts regarding Formation Metals Inc.'s performance made by these media interviewee's and newsletter writers are theirs alone and do not represent opinions, estimates or forecasts of Formation Metals Inc. or its management. Formation Metals Inc. does not by its reference above or distribution imply its endorsement of or concurrence with such opinions, estimates or forecasts. In some instances, Formation Metals has paid a fee in connection with such media and newsletter coverage.

In a diplomatic cable released by WikiLeaks last year, there was mention of a cobalt mine in the Democratic Republic of Congo. The document revealed that the U.S. Department of Homeland Security considered this mine so vital that its "incapacitation or destruction ... would have a debilitating impact" on U.S. security or the national economy. That's because the U.S. is the world's largest consumer of cobalt, but mines none of it.

Now that is set to change. The first mine in the U.S. dedicated to producing cobalt will open in Idaho next year, reflecting the metal's increasing importance in transportation, communication, and energy technologies. Cobalt is used in rechargeable batteries for wireless devices and hybrid vehicles, and in catalysts for refining gasoline. Half of the $440 million worth of cobalt consumed in the U.S. last year went into heat- and high-pressure-resistant "super-alloy" metals for aircraft engine compressors, combustion chambers, and turbines.

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