December 4, 2017 / 11:38 AM / 2 years ago

MINOR METALS-Limited supply, higher demand push cobalt prices up

Dec 4 (Reuters) - Falling cobalt supply from top producer the Democratic Republic of Congo and rising demand has tightened the market, boosting prices of the metal used to make superalloys for jet engines. Cobalt prices COB-ING-LON at around $32 a lb have more than doubled since January and are at their highest since October 2008.

“The cobalt market is being squeezed, there is a lack of material,” a trader in the U.S. said, adding that strong demand from jet engine makers was partly behind a tighter market.

Also behind surge since December 2015, when the price was below $10 a lb, is growing interest in electric vehicles powered by cobalt-containing lithium-ion rechargeable batteries.

Governments and auto makers around the world are aggressively promoting electric vehicles to cut emissions from cars fuelled by diesel- and petrol-powered engines.

Volkswagen, the world’s largest auto maker, recently approved a 34 billion euro spending plan by the end of 2022 to accelerate its efforts to become a global leader in electric cars.

“There is very limited availability for spot demand and people with little stock are also unwilling to sell as they don’t know when they can restock,” a London based trader said.

Rising demand from Asia, including some heavy purchases by China’s State Reserves Bureau (SRB) has added to the supply crunch, traders said, saying the stockpiler bought nearly 5,000 tonnes of cobalt in the first half of 2017.

“Chinese buying, rising demand and the DRC are reasons behind tight supplies ... Producers are struggling to respond with higher production,” SP Angel analyst John Meyer said.

No one at the SRB was immediately available to comment.

Chinese imports of cobalt ores and concentrates from DRC fell nearly 54 percent in October from September, according to official data from China.

Roughly 65 percent of the world’s cobalt, estimated at around 100,000 tonnes this year, comes from the DRC.

“It has become a sellers market ... We see prices rising at least until January 2018,” a Luxembourg-based trader said.

Reporting by Nallur Sethuraman, Vijaykumar Vedala in Bengaluru and additional reporting by Tom Daly in Beijing; Editing by Pratima Desai and David Evans

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