nickel price is down, page-4

Cobalt price UP

Cobalt's Future Driving Ahead with Hybrid Cars

By Richard Reinhard
Jun 23 2008 4:52PM

www.growthstocksweekly.com



High gas prices are moving the number hybrid cars sold into overdrive. And that is helping cobalt prices stay higher longer than anyone thought.

Look at this recent news headline from the Chicago Tribune:

"Battery-powered car race is on: Despite current cost and safety concerns, automakers see plug-ins and hybrids as remedy to future $5-a-gallon gasoline”

The article quoted a Ford Motors release, stating that it expects U.S. hybrid sales to reach 500,000 units this year, about 3 percent of the market, and to triple to 10 percent in a few years if gas reaches $5 a gallon and stays there.

Cobalt is a key ingredient in hybrid car batteries – and one of the reasons the price for cobalt has jumped from $25 to $50 per pound this year. There are anywhere from 5 to 18 pounds of cobalt in every hybrid car battery.

That’s a lot of new annual demand for cobalt. If the market did triple to 1.5 million units, even at 10 pounds cobalt per car, that makes 15 million new pounds of cobalt needed annually – a huge increase in a small 60,000 ton per year (120 million lbs) market.

Toyota just announced they sold their one-millionth hybrid, and are looking to sell one million per year over the next decade. They can’t keep them on the dealer lots. The following excerpt comes from a June 2008 story at www.hybridcars.com:

"A year ago, our [vehicle] supplies were at record levels in Prius," Bob Carter, head of Toyota’s U.S. operations told the trade journal Automotive News. "Now we're in catch-up mode." Toyota can’t ramp up battery production fast enough to build enough Prius vehicles to meet demand, Carter said. Waiting lists for Prius are growing to six months and longer. "We're pushing for every bit of production we can get," Carter said. "We're working very closely with our suppliers to increase that capacity."

The burgeoning hybrid industry is going to create a supply/demand impact in an already tight cobalt market. SFP Research out of the UK forecasts growth in cobalt demand for hybrid vehicles from well under 1000 tons (2 million lbs) in 2005 to over 9000 tons (18 million pounds) by 2015.

“Cobalt production has tripled in the last 12 years from 20,000mt per annum in 1995 to nearly 60,000mt per annum in 2007. Production will have to increase by another 25% just to keep in equilibrium with the above forecast hybrid demand and the natural growth in existing uses” concluded an article in Resource Investor.

Because cobalt holds an electric charge better than almost any other metal, it is hard to replace – even at $50 per pound. And the current electric batteries work so well – being re-charged as they drive – there is little incentive to change their structure (and other metal prices have skyrocketed as well as cobalt – nothing is cheap anymore).

Many of the consumer electronics we use today are also powered by cobalt-laced batteries. That market has leaped exponentially in the last decade with the proliferation of things like cell phones and iPods – also creating competition for the automakers on the cobalt demand side.

The cobalt price is now roughly $45/lb, depending on where in the world you buy it. Looking back on 2006 and 2007 research reports from major brokerage firms in Europe and North America – none had forecast the $50 cobalt prices we saw earlier this year.

With +$4 gas, hybrid car demand is likely to continue to drive cobalt prices higher.