The Concs, the Cobalt, the Cotton and the Crown

LONDON, Jan. 11 -- Almost a year ago one of the world's largest trading companies, Louis Dreyfus Commodities, decided to wind down its cobalt book.

It would continue to supply customers with which it had long-term contracts. But it was not going to develop further positions.

The close-knit world of cobalt traders, producers and refiners read the decision as one born of frustration at not gaining an ascendancy in the market as quickly as the trading company thought it would.

Producer-trader Glencore, refiners Umicore and OMG, and merchants such as SFP Metals, Darton Commodities, LN Metals, Traxys and Stratton Metals would not give up their influence easily.

While this issue of competition was a factor, equally significant was the fact that at the top level, and at its heart, Louis Dreyfus is a bulk agricultural commodities business.

It is a company where the top executives could not see the cobalt (and possibly the copper concentrates) for the cotton.

Trafigura, which has stepped into cobalt using its position in the African copper industry as a base, is a different proposition.

It has no cobalt metal in its book, but it does have copper, aluminium, lead and zinc. Traders are hearing more of it in nickel.

It also has cobalt concentrates.

Unlike Louis Dreyfus, which saw from afar a market that it was ultimately unwilling to devote resources to developing, Trafigura appears to have been pulled in by its copper suppliers in Africa.

And if such a commodities trading company, which turned over $73 billion in 2008 and has credit lines of $17 billion, is given a pull by some of its counterparts, it will certainly start to push itself.

Concentrate buyers last week were welcoming its arrival, saying that a more diverse range of supply would give them more options on price, timing and material.

Other participants also noted the big-bank-balanced trader’s touchdown in cobalt with interest, looking on it as a punchy contender to Glencore, and one that will make the market more interesting and competitive.

Do not get carried away though.

Glencore still has metal; and it still has the bulk of the concentrates production in the DRC.

The contender has a way to go before it can take the cobalt crown.