Cobalt prices in Europe and the US stalled this week with several participants saying the market was lacking direction, despite the emergence of some long-term consumer inquiries from superalloy producers.
Prices were unchanged with little business reported by both producers,traders and consumers. The Platts assessment for high-grade 99.8% cathode was unchanged Thursday at $18.00-19.25/lb delivered US and the Platts price for Russian 99.3% ingot (K1Ay and K1A) was unchanged at $17.00-18.00/lb delivered US.
In Europe, the Platts high-grade price was unchanged at $17.00-19.00/lb delivered. Some traders attributed the lack of movement in price over the last week to extended consumer plant closures and to Lunar New Year celebrations later this month.
But other participants said it could be an indication that the market could be about to ease. And some sources said that the beginning of January saw increased spot market activity, with consumers having satisfied their immediate spot needs.
"There are a few inquiries around," a European trader said. "I'm not sure now much is being booked. People are looking for 60 [metric] tons for delivery throughout the year -- 5 [metric] tons a month. That's the sort of inquiries we're seeing."
He said that these inquires were emerging from producers of superalloys in Europe and in the US to serve the aerospace and industrial gas turbine markets. Another European trader agreed saying that business was quiet in the first half of the week, but inquiries had picked up from Wednesday afternoon onward.
A consumer said he believed the market was quiet after an initial flurry of spot market activity to end-users at the beginning of the month. But he said that he had received calls from two suppliers inquiring if he needed material, but they did not make unsolicited offers.
"It was more of a periodic, courtesy call from people I've dealt with [in the past]," he said. But he did say that both callers had said that things were "picking up and that I might want to consider my next requirement sooner, rather than later."
The consumer said that all of the price indications he had seen were unchanged from last week, saying that he had seen high-grade prices from $18/lb to a high of $19.50 and Russian at $17-18. Last week, the same consumer booked 5 mt of K1Ay at $16.95/lb.
Another consumer also attributed the price increases seen earlier this year to short-term consumer spot market activity. "What we saw at the start of the year was a bit of pent-up demand being spent and that increased spot market activity," he said. "Now consumers are covered for the time being on a short-term basis, while the superalloys guys are quietly locking in forward tonnage for well into 2010 and even 2011 at fixed prices." But he said he thought the fact prices had stalled for a week could be a sign of some weakness.
"I don't think those that want it at $25 at the end of the month are going to succeed," he added. A US trader said that there were unconfirmed reports that a superalloys customer had booked Russian K1A or K1Ay at around $17-17.95/lb on a long-term delivery throughout this year and was surprised that it had not gone at a higher number. "We'd been working on the basis of cobalt being in a contango with forward deliveries seeing a premium to spot," the US trader said.
Meanwhile, a superalloys producer said that he was in the market for high-grade cobalt on a long-term basis on fixed price and was looking for 5 mt of K1Ay for deliveries throughout 2009 and into the middle of 2010.
Traders said that one area of demand that appeared to have suffered of late was in the batteries and chemicals market, while aerospace demand was holding up well, despite the possibility of some aircraft order cancellations.
"Even with cancellations and with likely cancellations, there's still a big backlog [of orders]," the superalloys producer said. "And if you look at the latest deliveries of aircraft that were delivered in 2008, all those engines will need spare parts over their lifetimes [requiring cobalt]." He said that industrial gas turbines, which also use superalloys, was even more robust than aerospace.
Figures published on Thursday showed that Airbus saw a 7% year-on-year rise in deliveries in 2008 to a record 483 civil aircraft, while US rival Boeing, hit by a lengthy machinists' strike in the fall, saw deliveries fall an annualized 15% to 375 planes.
Airbus sold $100 billion worth of aircraft last year, which included 472 single-aisle aircraft and 310 wide-bodied aeroplanes. Boeing sold a total of 662 civilian aircraft of all types in 2008, down 53% on 2007. Both airlines have a similar-sized book of back orders, amounting to around 3,700 aircraft for delivery over the next six years.
A second European trader agreed that battery demand for cobalt had fallen, largely because of reduced consumer spending on electronic goods. But he said he believed the chemicals sector had been worse affected. The result meant that cobalt consumers generally had yet to figure out long-term purchasing strategies. .
"Consumers just don't know what they want to do on buying strategy. They don't have an accurate idea of what their demand will be and they don't want to commit to volumes," he said, adding that many were using the spot market, but could switch to formula business later.
He said that he had just concluded one formula sale for delivery from March 1 to December 31 this year, saying that the consumer chose to cover Q1 requirements on a spot basis and lock in for later in the year.
