Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
A strategic material is a commodity whose lack of availability during a national emergency would seriously affect the economic, industrial, and defensive capability of a country – many countries classify cobalt as a critical or a strategic metal.
Cobalt made the short list of four metals that the European Union chose to name as representative of the 40 metals it is classifying as critical. The US is the world's largest consumer of cobalt and the US considers cobalt a strategic metal. The US has no domestic production - the United States is 100% dependent on imports for its supply of primary cobalt - currently about 15% of U.S. cobalt consumption is from recycled scrap, resulting in a net import reliance of 85%.
Although cobalt is one of the 30 most abundant elements within the earth's crust it’s low concentration (.002%) means it’s usually produced as a by-product - cobalt is mainly obtained as a by-product of copper and nickel mining activities.
Today 40% of the cobalt consumed in the world originated as a by-product from copper production in the West African country of the Democratic Republic of Congo (DRC) - cobalt production in most other countries is a by-product of nickel mining.
The copper deposits in the Katanga Province of the Democratic Republic of the Congo are the top producers of cobalt and the political situation in the Congo influences the price of cobalt significantly. The politically unstable Democratic Republic of Congo contains half the world’s cobalt supply and represents the lion’s share of anticipated future cobalt supply – the DRC’s 2007 output was equal to the combined production of cobalt by Canada, Australia and Zambia.
In a nine billion dollar joint venture with the DRC China got the rights to the vast copper and cobalt resources of the North Kivu in exchange for providing $6 billion worth of road construction, two hydroelectric dams, hospitals, schools and railway links to southern Africa, to Katanga and to the Congo Atlantic port at Matadi. The other $3 billion is to be invested by China in development of new mining areas. Approximately half of known global cobalt reserves are in the DRC, and close to 40%-50% of incremental cobalt production, over the next five years, is anticipated to emanate from the DRC.
China is extremely short of cobalt concentrates and needs to import cobalt concentrates in large amounts every year. The leading global producers of refined cobalt are China (39%), Finland (15%) and Canada (8%). China is a leading supplier of cobalt imports to the United States.
The cobalt market is small in comparison with other base metals. Consumers purchase cobalt through negotiated agreements, bids, and open markets from producers, traders and to a lesser degree, government stockpiles and private inventories.
Cobalt is a strategic and critical metal used in many diverse industrial and military applications.
- Super alloys
- Renewable Energy Re-usable energy storage systems
- Wear resistant alloys
- Binder Material
- Thermal spray coatings
- Life Science
- Catalyst in de-sulfurizing crude oil and as a catalyst in hydrogenation, oxidation, reduction, and synthesis of hydrocarbons.
- Gas to liquid technology (GLT)
- Other Uses - Drying agents in paints, de-colorizers, dyes, pigments, and oxidizers. Promotes adherence of enamel to steel, and steel to rubber in steel belted radial tires
LME Cobalt futures contracts commenced trading on the London Metal Exchange (LME) on 22 February 2010. LME Official Opening Stock 18th March 2011 was 248t. Spot price was US$37,500.00 tonne
China seemingly has most of the DRC’s production of cobalt locked up, that’s up to 40% of global mined cobalt.
Cobalt is classified as a strategic/critical metal.
With the recent strong support for electric vehicles the use of cobalt in this sector alone has led to a formidable demand for the element.
There is no doubt in this author’s mind that cobalt’s profile will continue growing in the coming months and years.
Is cobalt on your radar screen?
If not maybe it should be.
Richard (Rick) Mills