SHANGHAI, Feb. 3 -- According to sources from overseas market, Democratic Republic of Congo made an announcement on February 1st that Katanga bans exports of cobalt from 16 companies, mainly cobalt producers. According to Moise Katumbi Chapwe, the the governor of Katanga province, the ban has been put in place because the companies have failed to fulfill an earlier provincial ruling, which required them to set aside 500 hectares for the production of maize. The companies include: Compagnie Miniere du Sud-Katanga (CMSK),Congo Loyal Will Mining (CLWM), Cota Mining; Feza Mining, Golden African,JMT/MJM, Katanga Copper Co, Katanga Metals, Magma Minerals,Mehul Mining, MIEL International, Mining Yue, New Dathu Minerals, Rubamin SPRL, SARDC and Volcano Mining. What's worth noting is that, among the 16 companies, 2 of them, namely CMSK (a joint venture between George Forrest Group and DRC state mining company Gecamines at Luiswishi) and Volcano, have done business with trading company Trafigura, which prompted suggestions that it is competing with Glencore.
SMM believes that this ban is just released on the eve when cobalt is going to be traded on February 22nd, so negative impact of this ban will be expanded. When entering into mid-December, cobalt prices in overseas market quickly climbed, and raw materials also advanced as well. However, market consumptions from end-users were still stagnant as most domestic producers had inventories on hand which can be used for 3 to 6 months, so domestic producers only consume previous inventories and purchase no raw materials at present. After the ban was released, panic buying from small sized producers without ample raw material inventories will be triggered, as their raw materials will be consumed out in one or two months after the ban was released. This panic drive up buying will not only help constantly futures prices of raw materials, but will also increase cargo-holder's interest in holding goods in spot market, which in turn will push up cobalt prices. In addition, this ban will trigger crazy buying from long positions when cobalt is traded on LME futures market on February 22nd, and prices of raw materials and cobalt metals will both soar in a certain time.
It is hard to tell effectiveness of enforcement of this ban. If cobalt raw materials can still be smuggled, the effectiveness of this ban will be discounted. If this ban can only be enforced within a short period, cobalt prices will experience wide fluctuation. As for cobalt product producers that lack supply of raw materials in China, it is not bad to adopt a wait-and-see attitude at present.
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