cobalt forecast

UPDATE 1-Credit Suisse ups cobalt price forecast by 50 pct

20 December 2007

Source: Reuters News

HAMBURG, Dec 20 (Reuters) - Banking group Credit Suisse said on Thursday it raised its average price target for cobalt in 2008 by 50 percent on tight global supplies and said price spikes to $50 a pound were possible.

The bank said in a report it was raising its average cobalt price forecast for 2008 from $20 a pound to $30 a pound.

Cobalt prices on Europe's spot market in Europe have risen to record highs of over $40 a pound this month, driven by rising consumer demand and speculative buying.

The metal, used to make batteries and aircraft components, was trading at around $41 a pound on Thursday. Prices have risen by around 50 percent since January.

"The cobalt market should remain tight, underpinned by tightening short term supply and surging demand," Credit Suisse said.

It added: "Cobalt prices could spike to $50 per pound in the short term if supply continues to dry up while demand remains strong."

"This commodity has a history of wild swings and after years of enduring a major downturn it appears that the fortunes of cobalt are now on the way up."

"We believe consumption particularly from China shows no signs of slowing and global demand for cobalt could grow as much as 7 percent per annum from 2007 to 2009."

Supply from the Democratic Republic of Congo is likely to undershoot previous expectations, the bank said.

"Only two years ago, some of the doom and gloom cobalt forecasters were talking of a long term cobalt price of only US$6-8 per pound given the potential new supply from DRC.

"Clearly the DRC is taking much longer to come onstream than first expected," the bank said in a report.

The African country has the potential to be one of the world's largest suppliers of cobalt, and several mining projects are underway there, but production may be delayed owing to infrastructure problems. Credit Suisse, in conjunction with commodities trading firm Glencore, offers a financially settled contract which allows investors to buy cobalt without ever taking delivery of the metal.

Mining firms BHP Billiton